1/ There are lots of hardware wallets available—@coldcardwallet, @trezor, and @ledger to name a few. But what is a hardware wallet, exactly? Here we discuss what hardware wallets do, what they don't do, and some things you should consider before you start using them. 🧵
@COLDCARDwallet @Trezor @Ledger 2/ A bitcoin hardware wallet is a compact, dedicated device that generates and safely stores your bitcoin keys offline. Your keys are what allow you spend your bitcoin, and keeping them offline minimizes the risk of remote attacks and malware stealing your funds.
3/ One common misconception is that hardware wallets store bitcoin inside the device itself. In reality, no bitcoin wallet—software or hardware—stores bitcoin inside it. Instead, all bitcoin lives on the blockchain—wallets just store the keys!
4/ Hardware wallets carry out a variety of functions for receiving and spending bitcoin and securing your keys. Here we’ll touch on five of these functions: generating seeds, storing your seeds, signing transactions, recovering wallets, and verifying addresses. 
5/ Generating seeds: Hardware wallets using bitcoin standards generate a seed and a corresponding seed phrase—the cornerstone for constructing a bitcoin wallet. Based on the seed, keys and addresses are generated for receiving bitcoin on the blockchain. unchained.com/blog/what-is-a…
6/ Your seed is really just a long random number, and hardware wallets use various methods to achieve this randomness, like a random number generator. Other wallets use a combination of internal and external sources, the most popular example of the latter being dice rolls.
7/ Hardware wallets create seed phrases by mapping the seed to a list of 2,048 words. These should be carefully written down and saved in a secure offline location. unchained.com/blog/how-to-st…
8/ Storing seeds: Once generated during initialization, your bitcoin wallet’s seed is stored inside the hardware wallet. If your hardware wallet uses a secure element, it generally resides there and cannot be exported from the device in plain-text form.
9/ A hardware wallet’s limitations for exposing the seed are part of what makes it secure. Hardware wallets are considered a form of “cold storage” because they store seeds in an environment that is isolated from the internet.
10/ Signing transactions: Signing a transaction with a hardware wallet involves a series of steps—beginning with creating an unsigned transaction with wallet software and passing it to the hardware wallet itself to be signed by private keys that are derived from the seed.
11/ At no point during the process does a private key leave the hardware wallet or touch an internet-connected device. Only the transaction data moves between the wallet software and the hardware wallet.
12/ Verifying addresses: Bitcoin transactions are immutable, which means if you send your bitcoin to the wrong address, it can be permanently lost. Thankfully, hardware wallets also allow you to double-check your bitcoin address on the device before sending funds.
13/ Recovering wallets: If you set up a bitcoin hardware wallet, backup the seed phrase, and later, something happens to it—fire, theft, flood, malfunction, loss, etc.—the best way to recover your funds is to restore your seed phrase to a new hardware wallet.
14/ Hardware wallets are flexible. Once initialized, you can use third-party bitcoin wallet software alongside your hardware wallet to manage your bitcoin. Popular options include @SparrowWallet, @ElectrumWallet, @SpecterWallet, and our own multisig wallet solution.
@SparrowWallet @ElectrumWallet @SpecterWallet 15/ They're also great for #multisig! In a singlesig wallet, one signature from one key is enough to move your bitcoin. In multisig wallets, generally, two or more signatures from keys stored on separate hardware wallets are required to transfer funds.
16/ The advantages of hardware wallets as a primary tool for your #bitcoin security are clear. Still, there are nuances about which to be aware. For one, hardware wallets aren't free—a good one usually costs around $60-$150.
17/ And while great for cold storage, hardware wallets are also not very convenient for frequent transactions like frequent trading or buying coffee—you’re probably better off using a hot wallet holding smaller amounts of bitcoin in those cases.
18/ If you're new to hardware wallets, they can seem intimidating. But there’s no need to go it alone. Our Concierge Onboarding walks you through how to use hardware wallets to set up a multisig vault, and it's only $250 until Oct 31, 2022. Learn more: unchnd.co/3MW1Qzf
Read more about bitcoin hardware wallets: unchained.com/blog/what-is-b…
• • •
Missing some Tweet in this thread? You can try to
force a refresh
