Take Care of Your Bitcoins: What Is a Physical Wallet and How It Works

Every day more concerning news are receive about people who lost their bitcoins. Because they stored cryptocoin credentials in computer for exchange. Finally, this cause the attack to victim’s PC. So, how can they managed and what are the options to protect them? The physical wallets are ever best solution.

Vaults and keys

First: Although they are called cryptocurrency, they have very little in common with physical coins. Bitcoin is a system of accounts whose data is stored in the blockchain. In this, there are addresses and their balances, but nobody “has” the coins. What are used of a pair of keys, a private one and a public one. Which allows to operate a certain account. The public allows you to check the balance and make deposits and the private one is used to move the funds to another address when generating a signature that authorizes the transfer. This is important because the wallet keep this pair of keys and not the exchange page, nor the paper where they are printed, nor the mobile application. Who controls the keys, controls the account.

If a person could memorize them, security would be a simple matter.But memorizing is somewhat difficulty of doing so. Then it is necessary to keep them somewhere and problems arise. There are different kinds of wallet implementations, some more convenient and others more secure.

Never believe in computer

When saving the keys in a computer, even when they are encrypted, and using a program to create the signatures, the security of the computer is the weak point. If the computer is infected by malware, it could have access to the keys and spend all the bitcoins. To avoid this situation, different companies created physical wallets. Pieces of hardware similar to a USB pendrive that stores the keys outside the computer, minimizing access. The computer is still in charge of administrative tasks, but at the time of signing the transaction sends the data to the physical wallet and the user can check that everything is correct, sign it and send it back to the computer to process and notify to the Bitcoin network.

Ledger Nano S, Trezor and Keepkey are three of the main physical wallets in the market. They are quite similar: they connect via USB. Their is a screen that shows the details of the activity that need to be validated. Also their interface is control by a few buttons.

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When configuring them, it is necessary to install a manufacturer application on a computer or telephone and connect them. First, you have to establish a security PIN. Second, it will show us a “seed phrase” that is used to recover private keys if the equipment is broken or lost. When making a transfer, the team asks for the PIN and is responsible for signing it, without passing the private key to the computer.

All three are around US $ 100 in official stores but they are not available worldwide. When buying them, it is important to check that their boxes are sealed to avoid entering private keys in a computer that could be intervened.

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