Bitcoin Forum

1. Are there any disadvantages of using a hardware wallet?
I have heard they make private key extraction difficult.

2. In what circumstances would you need a private key? What are private keys purpose?
3. What happens when lose a hardware wallet?

Thanks in advance.

There may be some vulnerabilities in the hardware or firmware that have not been detected. Also, your hardware wallet can become lost, stolen, broken or corrupted. It is very important to write down your seed words so that you can recoup your coins. The Trezor requires a 24 word seed. Unless you are going to memorize these words in the exact order, you will have to write them down. (electronic storage is not recommended.) However, then that piece of paper can become lost, stolen or destroyed. You will need to safeguard that piece of paper. You can make multiple copies and store them in multiple locations which will mitigate the seed from becoming lost or destroyed. The problem with multiple copies though is that it increases the chance of your seed getting stolen.


Yes, the main reason you may want your private keys is to try and claim some of the hardfork coins. Also, you may want to generate a paper wallet with the private key to use at a Bitcoin ATM and claim cash on the spot. There are ways to claim hardfork coins with the seed. But then you will have to basically send coins to another location and then reset your hardware wallet with a new seed.
The private key is the sting of characters that allows you to spend your coins. It is cryptographically tied to the public key. The public key is the address you use to send coins to.


If you have your seed(you should have written down the 20+ seed words), you can restore the wallet using another wallet program/hardware device. However, you may then want to move all of your coins to another location ASAP. If your hardware wallet is missing, you should assume the seed is compromised. None of the addresses generated by that seed can be considered safe.

bones261 pretty much gave a thorough answer so I'll just give you a different answer for the first question.

Personally the only slight disadvantage I have with a hardware wallet is that it's quite a hassle to use compared to software wallets, as you'd have to connect this device to your computer via a usb cable, which is ever so slightly a hassle. No biggie though, having your crypto being secure is a bigger advantage that outweighs this small disadvantage.

I would also like to add that hardware wallets are very specialized in that they're pretty much only used for cryptocurrency storage, which are worth a fortune nowadays. This means that it has a massive target on its back to hackers (and probably you, who owns one, by extension). The way it's built makes it hard, if not impossible to steal the contents remotely, but you never know when things might change.

You can find a somewhat extensive discussion regarding their downsides here (https://bitcointalk.org/index.php?topic=3176978.0).

They're still much safer than most other alternatives, but it's better to be aware of their pitfalls.

I personally use a Nano S Ledger and I am very satisfied with it. It is very important to write down the recovery phrase, that could be used in case of stolen or lost.The private key is used to access your wallet.Before storing your cryptocurrencies, please get very well informed about it (https://cryptoorders.com/articles/storing-cryptocurrency-software-wallet-vs-hardware-wallet/).

I use a Ledger Nano S for a few coins that I hold a fair amount of - it's secure and gives me some peace of mind.

However, I travel a lot for work, and my family takes a lot of long weekend trips, etc. That's great, but I don't bring my hardware wallet with me (I don't want it to get stolen/lost). As a result, it is very difficult to take advantage of any sudden market opportunities. If you are a straight "HODLer" it's fine, but if you like to do some trading every now and then you have to really think about how much you want to balance secure storage with trade readiness.

Only disadvantage for me is it's quite expensive and cumbersome to plug in and out of a PC.

Lol well to be fair, if you want to be ready for trading opportunities and you trade often, keeping coins in an online exchange is your best option. It's not as much a disadvantage of hardware wallets because it's pretty much on par with every other wallet as it is an advantage of online exchange wallets.

But yeah, it is a bit more inconvenient to use than some other readily available options, I guess. If that's all the downsides users can say about them though, then they're fantastic devices. Let's just hope they maintain their reputation of being remotely invulnerable.

Everyone has touched on the slightly inconvenient aspect of hardware wallets compared to other wallets--no one will deny this. However, one thing to note is that you CAN use more than one wallet for your crypto practices. Managing multiple wallets, different exchanges, coins, etc is a skill that develops with time but is certainly viable. You could always use a hot wallet like samourai on a mobile or electrum on a desktop for immediate liquidity purposes while using the hardware wallet as your main device for offline storage. If you go this route just make sure you have backed up everything, and feel comfortable when it comes to transactions to and from different points of access.

Cheers

I cant wait until Ethos release their Universal Wallet tbh... will be nice to have all my cryptos in one place

This has been the case up until this point (and not to be spammy or anything) but ECOMI are bringing out a hardware wallet (the Secure Wallet) which operates wirelessly using an encrypted bluetooth connection. In this way it is designed to be carried on you at all times, and you can interact with it via the companion app on your iOS or android device, keeping your crypto-assets and private keys as safe as possible, but still have the convenience of keeping it on you at all times.
To be fair, the main reason you want your private keys is to protect your assets. The private key is used to encode the information you are sending, and to generate the public key. So if someone has access to the private key they can also access your crypto. Being able to claim new coins in a fork is great, but it can leave you vulnerable to malware and viruses if you're using a hot wallet to claim them. The ECOMI Secure Wallet supports all major forks without ever letting your private keys leave the device, and as it is never directly connected to an online device it can never be corrupted. It will also let you generate QR codes through the app to withdraw cash at bitcoin ATMs without having to carry around a paper wallet.

Point is, cold storage wallets are the safest way to protect your assets, and some are better than others when it comes to security, portability and capabilities. If you want more information send me a message, or check it out at www.ecomi.com.

Agreed - this is what I meant by the balance comment in my post. It's a good practice to have a chunk of your coins in cold storage, and (if desired), a chunk in a hot wallet or even exchange wallet for short-term, moving things in as you need to.

For me, I think of wallet breakdowns a little bit like:

Exchange wallet: Brokerage
Hot wallet: Checking
Hardware wallet: Savings/CD

A good mix is a good idea.

Remember that convenience has it's price so if its quite expensive for you, you are paying for the safety of your coins.