How does a hardware wallet work?
Hardware Wallets such as the Ledger Nano X, TREZOR Model T, BitBox02 or KeepKey all work according to the same principle. They are a special form of a so-called wallet, which is used to manage cryptocurrencies. A hardware wallet is a physical device that securely and inisolationly generates the private keys to the cryptocurrencies. Due to the extra hardware, they have some advantages over software wallets:
- private keys are often stored in a protected area of a microcontroller and cannot be transmitted in plain text from the device
- immune to computer viruses stealing from software wallets
- can be used securely and interactively, private keys never need to touch potentially vulnerable software
- the software is open source in most cases, so that the user can validate the entire operation of the device.
However, it is important to understand that hardware wallets are a high-quality goal and depend on various assumptions that apply to maintaining security. They are not a miracle weapon, and there are several realistic ways to hack a hardware wallet Especially if someone has physical access to the device.