In this day and age where cyber-attacks are so frequent, it is crucial to store your digital assets securely to prevent theft or hacking. Typically, investors have their cryptocurrencies kept in secured crypto wallets. These crypto wallets can be hardware devices or online software programs that store your private keys securely. 

You may easily store your crypto on some online crypto exchange thanks to the wallet services they provide. However, not every exchange or broker will automatically provide wallet services. Even if they do, these exchanges despite having high security, are prone to cyber-attacks and you can lose your assets stored in those custodial wallets.

Of course, hackers can also hack your investment in NFTs. The truth is that marketplaces have to contend with hacking, an example would be the hacking of Opensea in February 2022, causing $1.7 million worth of NFTs to be stolen through a phishing attack.

But how can we guarantee that our priceless digital content won’t vanish?

When the price of Bitcoin started to skyrocket in 2014, consumers quickly realized they needed a safer way to safeguard their investments and recent gains. The TREZOR One, the first cold storage hardware wallet ever, was released in March by the Czech startup TREZOR.

The hardware wallet is precisely the opposite of a software wallet if that makes sense. A hardware wallet is a physical thing, frequently looking like a USB flash drive. Hardware wallets can let users store cryptocurrencies and NFTs, just like software wallets can.

One common misunderstanding is that you store your tokens in hardware wallets. However, your tokens are stored online on a blockchain and require a private key to access them, a hardware wallet does nothing more than managing a wallet’s private keys, essentially taking them offline. 

Hardware wallets typically have password protection as well as seed phrases for wallet recovery.

Because private keys on a hardware wallet never link to the internet, they represent a significant improvement over software wallets.

A software wallet is a crypto wallet that is installed on a computer browser extension or on a mobile device as a dapp. They are often connected to the internet as long as the computer or mobile device has WIFI, hence they are also frequently referred to as hot wallets.

Due to their accessibility, particularly for beginning users, software wallets are unquestionably the most common wallets storing NFTs. 

The most well-known and essentially synonymous with software wallets is MetaMask, an Ethereum software wallet. There are other Ethereum hot wallets like Trust Wallet and Coinbase Wallet. 

Other non-Ethereum software wallets include cryptocurrencies like Kukai for Tezos, Phantom, and Sollet on Solana.

Because private keys are stored online, and the wallet is on a constant internet connection, this makes them far more susceptible to cyber-attacks from hackers.

Software wallets are necessary for quick and straightforward trading because many dapps, crypto exchanges, and NFT markets demand their use to ease transactions. Even though it might seem like these wallets are pretty secure with a 12–24 word seed phrase, that hasn’t been the case.

Numerous MetaMask users have fallen victim to online phishing scams, unintentionally installing malware while surfing the web or clicking on dangerous links, which have compromised their hot wallets. Hot wallets are unfortunately vulnerable to various threats because of how accessible they are.

Hardware wallets must be physically inserted into your computer to view the data it contains. The keys to your digital currencies and NFTs will be kept on the device, not on web servers. 

Assets saved in hardware wallets are regarded as “cold storage” and much safer than those in software wallets because the hardware wallets do not have any connection to the internet.

Additionally, it is challenging, if not impossible, to steal the contents even when a hardware wallet is connected to a computer with internet access. 

The difficulty in stealing the content in the hardware wallet is because transaction signings are finished on your device using your private keys and then broadcast to the network over the internet. Malware cannot obtain the information required to forge a signature because your private keys never leave your device. Also, hardware wallets do not have complicated firmware for malware to attack.

Hardware wallets allow you to control your private keys, giving you complete ownership and control of your assets instead of relying on a centralized exchange to store them. Using a hardware wallet ensures that only you and no one else is accountable for having access to your private keys.

To hack into a hardware wallet, a hacker must steal the device and obtain the password which unlocks the private keys in order to compromise the wallet. Though not impossible, hacking a hardware wallet is much more challenging than hacking a software wallet.

Your assets will be safe and secure if you invest in an authentic device created by an established and skilled manufacturer. Hardware wallets mostly have screens to validate and show crucial wallet information, providing additional protection. For example, a screen can show the payment amount as well as the receiver’s address because the transaction is signed.

NFT owners ought to use a hardware wallet, or at minimum, to store their higher value NFTs in a hardware wallet. After all, a good hardware wallet costs about $100, a reasonable sum to pay to protect assets valued at hundreds or thousands of dollars.

Your cryptocurrency is wholly owned and controlled by your private keys, and the encrypted version of your private keys is your seed phrase, also known as the recovery phrase. It’s game over if you reveal your seed phrase to someone; bad actors normally use scam and phishing tactics to get you to give up your seed phrase.

You can be using a hardware wallet, but once your seed phrase is exposed, nothing can stop someone from stealing the contents in the wallet, unless you are able to transfer the contents out to another wallet in time. You can never re-secure a wallet with an exposed seed phrase. Keep your recovery phrase a secret at all times.

Users using hardware wallets must back up their data periodically in case of loss, theft, or destruction. Backups are a must – If you ever happen to lose your wallet, you can restore your wallet onto another device by utilizing the seed phrase. Your seed phrase must be kept secure and offline, ideally in a safety-deposit box, much like your private key. 

Although hardware wallets are the most secure choice for preventing “theft of encrypted private key through malware, a supply chain assault is what you should be concerned about when using hardware wallets. A fraudulent hardware wallet, or a genuine one with defective software, might be delivered to you.

There are counterfeit hardware wallets out there that can drain your crypto account of its funds. Never buy a hardware wallet on any online marketplace for secondhand goods. Ensure you are on the manufacturer’s official website when purchasing hardware wallets. Make sure the URL is correct by checking it in your browser’s address bar.

While a hardware wallet can protect you from most malwares, it cannot protect you from the “clipboard hijacking” malware. This malware transforms the text and modified the information on your copy and paste clipboard. When you copy a wallet address, it will change the contents of your clipboard to the scammer’s address, causing you to send crypto to the scammer instead of the correct party. 

Always double-check your transaction data (ensure contract addresses are accurate) and do a test transaction as a defense against clipboard hijacking. 

Also, use a dedicated device when making transactions with your hardware wallet. This dedicated crypto device should not have software downloads, dubious web browsing, or email—nothing besides your using it for your hardware wallet transactions.

In order to interact with a smart contract, you need to consent the use of your tokens which requires gas. To avoid the high gas fees and constant need for consent, DeFi protocols adopted infinite token approvals as the default action. The user is relieved of the need to continually spend gas by approving an infinite number.

As an illustration, suppose that before lending any crypto, you perform the infinite default approval action.

An infinite default approval is safe when there is no compromise to the smart contract, and only you can initiate the transaction when you need your token. However, later, if a hacker breaches the contract, the contract administrator or the contract itself could take all of your cryptocurrency. They can do all this without your consent since you have already given it prior.

However, only the tokens you gave unlimited consent for can be taken by the flawed smart contract you used to approve your infinite tokens, not your entire wallet.

To avoid this problem, don’t grant infinite token approvals. Instead, approve what you need. 

In conclusion, each collector must take care of their investment on crypto and NFTs. Hardware wallets, which are required if you’re serious about investing in cryto NFTs, are currently the safest options for personal storage.

Make sure to create complex passwords and steer clear of dubious websites that make promises that are too good to be true. When you are careful with the dapps and smart contracts you interact with, it drastically reduces the risks you expose your crypto wallet to.

Daniel is a full-time blogger and founder of Basigue.com where he writes articles on Web3, cryptocurrency, NFTs, E-commerce, business, and reviews on products and services. Daniel has experience in dropshipping, creating Shopify online stores, affiliate marketing, SEO, and running digital advertisements like Facebook and Google Ads. In his free time, he loves playing games or watching anime with his wife.

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