Consumer Protection Tuesday: How to Safely Choose and Use Hardware Wallets

This post is part of a weekly Tuesday series at Coinbase about the latest consumer protection and security measures for crypto owners.

At Coinbase, we’re working hard to help update the financial system, and make it safer and more secure. While only 0.34% of blockchain transactions are used for illicit activity, and cash remains the preferred medium for illicit transactions, crypto security is always a top priority. Coinbase maintains a robust compliance program, which includes Know Your Customer (KYC) checks, sanctions screenings, suspicious activity reporting, and strong law enforcement partnerships to detect and prevent illicit activity on our platform.

Putting Hard Wallets to Safe Use

Hardware wallets provide offline protection to crypto owners on the go. They are also recommended for those with large amounts of various coins.

The small devices resemble USB flash drives and act as “cold storage” without internet connectivity. Hard wallets do not actually store your coins, NFTs, and other assets. They serve as the private keys (unique letter and number combinations) to access your holdings—an added layer of security as long as you keep your hard wallet and passcodes safe.

With a growing number of wallet options, you need to pick wisely. It’s important to buy from an authorized seller and follow the device instructions carefully as a first step. 

Also follow these quick tips when choosing and connecting your first hard wallet.

Stick to Trusted Brands

To avoid scams and malware, it’s best to buy from trusted hard wallet manufacturers. Hard wallets that are compatible with Coinbase include Ledger.

Tip 1: Make sure you purchase your hard wallet directly from the manufacturer or an authorized third-party dealer to avoid potential risks. 

Tip 2: Check the legitimacy of a seller website by carefully viewing the quality of its content and double checking its URL.

Know When to Go Hot or Cold

Software (hot) wallets are often a better fit for less seasoned crypto owners. They are stored on your mobile device or computer and are connected to the internet. Hardware (cold) wallets do not connect to the web or other devices. This makes them less susceptible to hacking but a bit more complicated to use.

Tip 1: Make sure you’re using a trusted wallet on private WiFi. It’s best to use a VPN if you need to access your wallet on public WiFi. 

Tip 2: With any wallet, keep your recovery phrase (also known as your seed phrase) written down in a safe place that only you know of. This will allow you to retrieve your assets if your wallet or mobile device is lost, broken, or stolen.

 Take Caution Before Connecting

Before connecting a hard wallet to a computer or mobile device, you can generally find a tutorial video for that wallet online. When linking a Ledger hard wallet to Coinbase Wallet, you can connect with the mobile app or download a browser extension for Google Chrome.

Tip 1: Avoid linking your wallet to any device or software that you have not verified. Even the best devices can be hacked.

Tip 2: Never use a wallet that you did not authorize and purchase yourself. Some scammers send counterfeit cold wallets to targets they find in third-party data breaches. These wallets are set up to steal your assets once they’re connected.

Both software and hardware wallets require careful use. As a crypto owner, you choose your form of keys. Make sure you keep them safe and secure.