Hardware wallets: keeping crypto safe offline

Exchange account vs. your own wallet

When you buy crypto on an exchange, the exchange holds it for you, much like a broker holds your stocks. That's convenient, but it means you depend on the company staying solvent, secure and willing to let you withdraw. Exchange failures, such as FTX in 2022, have left customers waiting years for their money.

A self-custody wallet puts you in control of the private keys. Nobody can freeze or lend out your coins, but nobody can recover them for you either.

What a hardware wallet does

It generates and stores your private keys on a dedicated chip and signs transactions inside the device. Even if your computer has malware, your keys never leave the wallet. You confirm every transaction by pressing buttons on the device itself.

When it's worth it

• You hold more than you'd be comfortable losing if an exchange failed or your account was hacked.
• You plan to hold for years rather than trade.
• You're willing to keep a recovery phrase safe and private.

For small amounts you trade often, keeping coins on a reputable exchange with strong two-factor authentication is a reasonable trade-off.

Set-up rules that matter most

1. Buy direct from the manufacturer or an authorized reseller, never second-hand.
2. Write your recovery phrase on paper or metal, and store it somewhere safe. Never type it into a computer or phone, and never photograph it.
3. No real company will ever ask for your recovery phrase. Anyone who does, by email, phone, text or "support chat", is trying to steal your crypto.
4. Send a small test amount first when withdrawing from an exchange, then the rest.
5. Plan for inheritance. Tell a trusted person how to find your recovery instructions if something happens to you.

Popular hardware wallet makers

Not sure which to choose? See our Ledger vs. Trezor comparison of every current model.