When it comes to cryptocurrency, your wallet is everything. While your coins, tokens, and other digital assets always reside on the blockchain, your wallet is literally your key to accessing them. If someone hacks – or otherwise gets access to – your wallet, they get everything.
Wallets come in two primary flavors: software and hardware. These are often called hot and cold wallets respectively. Software wallets are “hot” because the private key stays online as long as your computer is connected. This makes them more convenient but at the cost of security. Metamask is an example of a software wallet.
On the other hand, hardware wallets keep your seed phrase and private keys offline, making them much safer. A Trezor wallet and a Ledger wallet are examples of hardware wallets.
How does a hardware wallet work?
A hardware wallet is a physical device used to store cryptocurrencies. You need to connect it to a computer to send transactions from one of your addresses, or create new addresses. You can receive funds, however, without connecting it to the computer.
Although a crypto wallet, whether hardware or software, is said to store crypto, it doesn’t keep any within it. Your coins and/or tokens live on the blockchain as bits of data. What the wallet stores are the public and private keys as well as the seed phrase.
The public key points to your address on the network. The private key, on the other hand, acts as proof of ownership of the crypto associated with that address. It is therefore used to sign off on transactions. So, anybody with it has full access to the funds in that wallet.
And herein lies the security risk. Software wallets are always online – they have to be to sign transactions. While this process only takes one or two seconds, it might be enough for a hacker monitoring the network to glimpse the private key.
Hardware wallets eliminate this risk by not being connected to the internet. They keep your private keys offline. This is why they’re known as ‘cold storage.’
When you want to perform a transaction, you’ll have to connect the wallet to a computer connected to the internet. For safety, the wallet signs the transaction offline within itself before broadcasting it to the blockchain. This makes it difficult for hackers to breach a hardware wallet the way they can with a hot wallet.
Hardware wallet issues
Cold wallets, while safer from hackers, are not immune to other issues. Some of the problems you may run into with your cold wallet include:
Hardware wallets need to be unlocked when you connect to a computer. This is usually via a pin or a password created when you originally set up the wallet. It serves as a form of authentication to prevent unauthorized access to your wallet.
There is also the passphrase. It is an optional security feature, usually, an extra secret word or phrase added to your seed phrase to create a hidden wallet. This wallet can only be accessed with the unique combination of the seed phrase and passphrase. That way, your funds stay safe even if someone steals your seed phrase.
Forgetting your pin or password prevents you from unlocking your wallet. And if you can’t do that, you can’t access your cryptocurrency until you reset the pin.
Fortunately, this isn’t a huge problem. Hardware wallet manufacturers allow you to recover your wallet using the seed phrase. As long as you have the seed phrase, you can set up a new pin or password by resetting your device and then restoring your wallet.
Forgetting your passphrase is a bigger problem. There is no way to recover it using your seed phrase. So, you may have to leverage a recovery expert.
Hardware wallets are electronic devices. So, like any other device, they can malfunction. This can be a result of a hardware or software issue. So, how do you deal with this?
If it’s a hardware issue, it may be that your wallet is damaged. It can also be that your wallet is at the end of its life cycle – it’s old and its circuits are failing.
Whatever the case, getting a new hardware wallet is the easiest course of action. You can then use your seed phrase to recover your wallet addresses, giving you access to your crypto via your new hardware wallet.
If the issue is in the firmware, buying a new wallet is not necessary. A quick reset may do the trick. Sometimes, the problem is that the firmware needs to be updated. In this case, you only need to update it to the latest version with the software on your computer.
If the issues persist, you should contact the manufacturer for further assistance recovering your hardware wallet.
Lastly, there might be connectivity problems. Your wallet may be working perfectly but is having trouble connecting to your computer.
If your wallet uses a USB cable as the connection medium, this can be due to a loose connection. So, you want to make sure that the cable is securely connected. If that doesn’t work, change the cables and try again.
Connection issues may also arise if your computer OS is incompatible with the wallet’s software. In this case, you may have to update your firmware or OS if one or both of them are not up to date.
Lastly, it may just be that your computer is misbehaving. Some troubleshooting and restarting may help solve the issue.
Issues with your hardware wallet can prevent you from accessing your crypto. These include a forgotten pin/password, physical damage, and connection troubles.
While some may be relatively easy to fix, others, like a forgotten pin, losing the wallet, and physical damage, will require a little more effort for hardware wallet recovery. But as long as you have your seed phrase, you’ll still be able to access your funds in the end.
If you’re having trouble using your seed phrase to recover your wallet, check out our article on how to recover your wallet seed phrase. Or if you need expert help, feel free to contact us.
Can you repair a physically damaged crypto hardware wallet?
It depends on the extent of the damage. In cases where it is possible, it is best to contact the manufacturer or obtain the services of a trusted professional repair shop. Experts can help move funds off a damaged hardware wallet in case it’s irreparable.
Why is the seed phrase important?
The seed phrase is crucial to restoring a crypto wallet. It generates the private keys, proving that the funds associated with the public address are yours. Therefore, it is crucial that you keep your seed phrase safe.