How Does A Crypto Hardware Wallet Work?

Everything starts with a Recovery Phrase (aka Seed Phrase), which is the first item that is created when you set up a Crypto Hardware Wallet. A Recovery Phrase is provided in the form of 24 individual words arranged in a specific order. You should write down your Recovery Phrase on a piece of paper and put away that paper in a secure location away from cameras, or risk of physical damage.

Using the Seed Phrase, the Secure Element within your Crypto Hardware Wallet will generate its root private key, also called a master key. This master key never leaves the secure element. The master key in turn is used to generate private keys for various crypto assets such as Bitcoin, Ethereum, etc. Private keys never leave the Crypto Hardware Wallet.

The algorithms used for deriving private keys for crypto assets from a master key are well-defined standards. This means every crypto asset stored within your Crypto Hardware Wallet can be recovered using your 24 word seed phrase. Such recovery can be done by a variety of different hardware and software crypto wallets. This is why it is critical to protect the seed phrase to avoid losing your wealth.

Crypto transactions that you carry out on the internet are managed using desktop/mobile applications, which are only given access to public keys of your crypto assets. Send or receive transactions are verified on the Hardware Crypto Wallet, which is additionally protected using a PIN. This is how a Crypto Hardware Wallet protects against threats like fault attacks, software attacks, and “man in middle” attacks, which software wallets would be unable to protect against.

A Crypto Hardware Wallet, typically the size of a USB Flash Drive, gives you the ability to easily carry with you a practically unlimited amount of wealth in the form of crypto assets. Obviously this is very different compared to traditional forms of money, like cash or gold, which can only be transported in limited quantities. With a Crypto Hardware Wallet, you can effectively become your own bank!


Related Posts