What is the purpose of a hardware wallet? You need a paper backup anyway?

[blickbox]

Everybody talks about hardware wallets, but I can't understand what it solves. In my case (and probably for most people), you would want one wallet for "daily" use, and a wallet for long term storage (savings account).

The daily use wallet doesn't require much safety (<$500), so a mobile wallet with the passphrase saved somewhere would work fine.

But what about the "savings account"? It doesn't make much sense for me to buy a hardware wallet? What problem does it solve? As far as I understand I would still need to save the passphrases on a paper anyway (in case of hardware failure), so why can't I just print the private key instead?

[flippener]

They are not the same thing. There is no such thing as a paper wallet really, it just means you've a record of your private key - you still need a software wallet to make transactions. A hardware wallet combines a software wallet with a physical record of your private key. It also allows you to send BTC and keep a record of transactions.

[odolvlobo]

1. You can't spend from a paper wallet.
2. You can't get the private keys from a hardware wallet.

[LTU_btc]

If you have paper wallet only, you can't send btc. Hardware wallets solve this problem. People choosing hardware wallets for daily use, not only for long term storage. Personally, for me it's more convenient to have hardware wallet instead of paper wallet. Paper wallets are safer maybe, but it can be used only for long term hodling, while hardware wallets are good for daily use.

[illinest]

Everybody talks about hardware wallets, but I can't understand what it solves. In my case (and probably for most people), you would want one wallet for "daily" use, and a wallet for long term storage (savings account).

Hardware wallets can actually function as both. Before the advent of hardware wallets, it made sense to keep a "hot wallet" and a "cold wallet" as you suggest for security purposes. Online PCs/servers can fall prey to malware and attacks in general, and your keys can be stolen. Cold storage and hardware wallets address this.

I haven't gotten one yet personally, so I still use a hot/cold system. I have a small spending wallet on my online PC for convenience and a cold wallet on an air-gapped PC that doesn't connect to the internet. When I need to move coins from cold storage, I create a transaction from a watch-only wallet and sign it from the air-gapped PC.

But what about the "savings account"? It doesn't make much sense for me to buy a hardware wallet? What problem does it solve? As far as I understand I would still need to save the passphrases on a paper anyway (in case of hardware failure), so why can't I just print the private key instead?

Hardware wallets are great for UX. They're easy for newbies. Sweeping paper wallets requires setting up cold storage again; hardware wallets can simply be used like a normal wallet.

I also prefer HD seeds to printed private keys because seeds are less obvious to third parties (thieves). You can store a seed in ways that obscure the order of the words (and the existence of the seed itself). They can also theoretically function as a brain wallet.

[bitart]

Everyone has a different limit that makes it uncomfortable to lose the coins. $500 is way too much e.g. for me to risk. Hardware wallets are mainly for security purposes. If you want to spend as well, not only hold, paper wallet is less comfortable and less easy to use compared to hardware wallet. Also, paper wallet needs a clean PC (free from viruses and malware) but hardware wallet deals with this as well, becasue you don't have to reveal your private key any time.

[blickbox]

Thanks for all replies! But I still don't understand why you would need a hardware wallet, unless you frequently send large amounts of bitcoin.

There's really nowhere to use bitcoin as of today (I have owned bitcoin for 5 months, and still haven't had any real world use). And even if I find someone accepting bitcoin, it's pretty useless because of fees?

Because of this, I do not consider bitcoin a currency, but rather an alternative for gold/saving, with some advantages.

So since I can't use it anywhere, I don't make transactions that often. But I will keep a <$500 wallet on my phone, which I don't see any point in securing anymore than my phone is secured.

The rest of my bitcoins I intend to hodl. They are currenctly on an exchange, and I want to move them out of that exchange and hold for a year++ (unless hell breaks lose). So that's why I wonder if there's any point in buying a harware wallet for storage, since it would also need a paper backup... In other words, it isn't really safer to store.


Am I correct in assuming that a hardware wallet is primarily useful for anyone who actually use bitcoin for transactions? Not hodling, and not micropayments?

[odolvlobo]

Thanks for all replies! But I still don't understand why you would need a hardware wallet, unless you frequently send large amounts of bitcoin.
...

Each has its advantages and disadvantages. You can decide which one is better for you. Someone else might choose differently.

[hatshepsut93]

Thanks for all replies! But I still don't understand why you would need a hardware wallet, unless you frequently send large amounts of bitcoin.

There's really nowhere to use bitcoin as of today (I have owned bitcoin for 5 months, and still haven't had any real world use). And even if I find someone accepting bitcoin, it's pretty useless because of fees?

Because of this, I do not consider bitcoin a currency, but rather an alternative for gold/saving, with some advantages.

So since I can't use it anywhere, I don't make transactions that often. But I will keep a <$500 wallet on my phone, which I don't see any point in securing anymore than my phone is secured.

The rest of my bitcoins I intend to hodl. They are currenctly on an exchange, and I want to move them out of that exchange and hold for a year++ (unless hell breaks lose). So that's why I wonder if there's any point in buying a harware wallet for storage, since it would also need a paper backup... In other words, it isn't really safer to store.


Am I correct in assuming that a hardware wallet is primarily useful for anyone who actually use bitcoin for transactions? Not hodling, and not micropayments?

Yes, you are correct, if you want to hodl Bitcoin without sending transactions and if you are able to generate your wallet 100% securely, than you don't really need a hardware wallet. So, if you choose some other method for hodling, make sure that the wallet is created in secure environment - I'd recommend installing Linux on a flash drive (make sure that it is signed by trusted developers!), then unplug any other drives and boot your fresh Linux and use it to create your wallet (again, verify installations first). If you will do all this offline, you can create a cold storage which can be as secure as hardware wallet when done properly. Electrum has a good guide on it: http://docs.electrum.org/en/latest/coldstorage.html

[DannyHamilton]

Thanks for all replies! But I still don't understand why you would need a hardware wallet, unless you frequently send large amounts of bitcoin.

There's really nowhere to use bitcoin as of today (I have owned bitcoin for 5 months, and still haven't had any real world use). And even if I find someone accepting bitcoin, it's pretty useless because of fees?

I use bitcoin every month to pay my satellite TV bill to Dish TV.
I've book travel with expedia.com and paid with Bitcoin.
I've made purchases at both overstock.com and newegg.com and paid with bitcoins.
I've purchased pizza from a local pizza delivery place that accepts bitcoins.
I expect to use purse.io to make a purchase from Amazon.com using bitcoins before this month is over

There are literally thousands of places in the world that accept bitcoins. You clearly aren't looking.

Because of this, I do not consider bitcoin a currency, but rather an alternative for gold/saving, with some advantages.

And you are allowed to think that if you like.  However, you should not expect that everybody else in the entire world thinks that same way.

So since I can't use it anywhere, I don't make transactions that often.

And I do.

The rest of my bitcoins I intend to hodl. They are currenctly on an exchange,

On an exchange? Well, that sounds like an absolutely horrible idea. Have you never heard of MtGox? I wouldn't expect anyone that makes such a poor decision to understand the need for a hardware wallet.

and I want to move them out of that exchange and hold for a year++ (unless hell breaks lose). So that's why I wonder if there's any point in buying a harware wallet for storage, since it would also need a paper backup... In other words, it isn't really safer to store.

And when you are done with your holding, and you want to exchange some of those bitcoins for your local currency...  How do you plan to do that?  I suspect that whatever method you plan to use, the hardware wallet would be a better option.  Are you nervous at all that you might make a mistake trying to spend from that paper wallet when it is worth $10 million?

Am I correct in assuming that a hardware wallet is primarily useful for anyone who actually use bitcoin for transactions? Not hodling, and not micropayments?

The bitcoin blockchain is not good for micropayments regardless of the wallet you use.

Unless you plan to hold your bitcoins straight into your grave, you will need to access them eventually.  Hardware wallet makes that access MUCH easier and MUCH safer than a paper wallet.

[MrHertz]

Any digital information could be hacked and stolen. It is very low probability, that you will lose your wallet. But if you are paranoid, you should better hold your important info on paper sheets.

[nessesthelle]

Usually you only have to remembmer your pin or master pass to restore all your data on a new device.

[TorbiK]

There's really nowhere to use bitcoin as of today (I have owned bitcoin for 5 months, and still haven't had any real world use). And even if I find someone accepting bitcoin, it's pretty useless because of fees?

Because of this, I do not consider bitcoin a currency, but rather an alternative for gold/saving, with some advantages.

I agree today to use bitcoin for daily expenses is not very profitable and not rational. The price for the commission does not justify these expenses. But to send large amounts to foreigners is another matter.

[alyssa85]

The rest of my bitcoins I intend to hodl. They are currenctly on an exchange, and I want to move them out of that exchange and hold for a year++ (unless hell breaks lose). So that's why I wonder if there's any point in buying a harware wallet for storage, since it would also need a paper backup... In other words, it isn't really safer to store.

The reason people tell you to get a hardware wallet, is because of bitter experience of holding coins on exchanges.

In the time I've been in bitcoin I have seen MtGox crash because of hacking. Cryptsy and Mintpal disappear with people's coins because insiders in those exchanges decided to steal them. BTC-E got closed down by the FBI because it turned out they were shady mafia and it was them who hacked MtGox.

Bitfinex has been hacked several times, as has Bitstamp and Poloniex. Bitstamp and Poloniex made good the coins - but what happens next time when the heist is bigger and they simply haven't got either the reserves or insurance to compensate people?

Remember that all these exchanges are un-regulated, with the exception of Gemini which has a NY State licence.

[cupronickel]

Everybody talks about hardware wallets, but I can't understand what it solves. In my case (and probably for most people), you would want one wallet for "daily" use, and a wallet for long term storage (savings account).

Hardware wallets can actually function as both. Before the advent of hardware wallets, it made sense to keep a "hot wallet" and a "cold wallet" as you suggest for security purposes. Online PCs/servers can fall prey to malware and attacks in general, and your keys can be stolen. Cold storage and hardware wallets address this.

I haven't gotten one yet personally, so I still use a hot/cold system. I have a small spending wallet on my online PC for convenience and a cold wallet on an air-gapped PC that doesn't connect to the internet. When I need to move coins from cold storage, I create a transaction from a watch-only wallet and sign it from the air-gapped PC.

But what about the "savings account"? It doesn't make much sense for me to buy a hardware wallet? What problem does it solve? As far as I understand I would still need to save the passphrases on a paper anyway (in case of hardware failure), so why can't I just print the private key instead?

Hardware wallets are great for UX. They're easy for newbies. Sweeping paper wallets requires setting up cold storage again; hardware wallets can simply be used like a normal wallet.

I also prefer HD seeds to printed private keys because seeds are less obvious to third parties (thieves). You can store a seed in ways that obscure the order of the words (and the existence of the seed itself). They can also theoretically function as a brain wallet.

Best answer on here, a very good quick guide. I'd still champion paper wallets for long term cold storage because they are simple, cheap and foolproof. You never have to worry about upgrading them, you never have to check if either software or hardware still works / hasn't been compromised. When it comes to spending from them, you'd research the latest secure method. This is changing all the time.

I agree that HD seeds are easier to use & secure than private keys. But you can certainly store also store a private key in a way that it obscures its existence. You'd just have to be a bit more clever about it. Here's the Bitcoin Wiki's example private key (https://en.bitcoin.it/wiki/Private_key#An_example_private_key): E9873D79C6D87DC0FB6A5778633389 . I can think of many ways you'd deal with that securely without compromising.

[nutsimo]

Usually you only have to remembmer your pin or master pass to restore all your data on a new device.

How can you restore with only the pin ?

If you buy a new one and enter the pin, it can't work, right ? Because other's have the same pin.

I agree with the seed tho.

[Lucius]

I have to confess I sleep more peacefully since I bought hardware wallet and send my BTC there.It is so far best way for keep coins safe and for daily use also.I agree with some users that paper wallet can be good solution for cold storage,I do not think there's any doubt about it.But if you want use your coins on daily basis and in the same time keep them in a safe environment, hardware wallet is something you must have.

For now there are no cases that some hardware wallet is hacked,people loss seed but this is another story.Storing coins on any online/desktop wallet is always a risk-one day you can open your wallet/account and see one big 0.If there is solution to protect your coins why not take advantage of that,it is not cheap,but also not so expensive.

[gentlemand]

Simple. Uncrackable transactions whenever you want. You can't say the same about paper or hot wallets.

However people seem to be far too quick to trust anyone and anything, or not verify at all, and I think there are going to be some hardware wallet scares in the future.

[Caesar-Giulius]

You only need to write down one set of backup seeds for your hardware wallet and you can store multiple coins supported by the hardware wallet. For each type of coin, you can have multiple addresses.

As for paper wallet, you need to print all the wallets you have.

[musliyevich]

hardware wallet is wallet with fixed private key with it.

no one can hack it , better for more than 1000$