What are the differences between crypto hardware wallet and USB stick? A USB stick and a hardware wallet such as the Ledger Nano may look pretty similar but that is all about the similarities in them.
There are lots of other differences between them. Ideally, choosing a device or a wallet is not only about storing your keys but it is also about generating and using them in the most secure manner possible.
Therefore, in order to choose the right option to choose your sensitive crypto data and keys, you will need to know the differences between a hardware wallet and a USB stick in the first place.
This article will tell you all about it including the basic differences between them. As such, a hardware wallet comes with a special chip inside it.
This chip ensures that the private keys stored in it are safe and do not leave the device.
This is the major difference between the two which means, in theory at least, no one can steal a private key from a hardware wallet.
Ideally, in a hardware wallet the data that you need to be signed must be sent to a special security processor in it before it is signed there.
On the other hand, a USB drive or USB stick cannot prevent one from copying the contents in it.
Moreover, when a user accesses the private key it allows using compromised wallet software, keylogger, a rootkit, or port sniffer.
For that matter, encrypting will not be of any help because the user or the software wallet inevitably needs to access the private key.
Crypto Hardware Wallet vs USB Stick – The Differences
It is important to store your data safely and be able to access them easily and readily when you want since cryptocurrency wallets are one of the most targeted data assets in the cyber security sphere.
Ideally, you can use a USB stick or a hardware wallet to store your crypto data but these are not created equal.
Well, apart from the basic differences mentioned above, here are a few other important ones for you to know so that you use the best one to store your data and serve all your purposes in the best possible way.
The hardware wallets are by far considered to be the best solution to store, send, and receive crypto securely because these are built exactly for this purpose. These wallets come with custom software and a set of secure elements. These, working together, keep the crypto safe.
On the other hand, USB drives can be used for several different purposes especially in the non-crypto world. Almost everyone today has and uses a USB stick to carry and share files quickly and easily, store a document offline, and even as a recovery drive for a computer.
Though it does its job well in all these fields, it simply does not seem to be good enough for crypto. Using a USB stick for crypto can be very bad news because it is not safe for it and can steal your assets. You can use it as a cold storage only if you do not have any other solution.
Ideally, while sending a crypto transaction you will need to sign it with your private key. This will prove that you own and are in possession of the private key that is linked with the address or public key from where the crypto is being sent.
You may type it or copy-paste it but that is not safe. Instead, using a hardware wallet is safe.
A hardware wallet is unique. This is because the private key is stored in the device directly which means that you cannot see it and also do not need to type it while signing a crypto transaction.
With a hardware wallet all you do is simply press a button to confirm. This will prevent typing it on a website or using a keylogger to copy it.
This saves your private key from being exposed to any bad actor, and not even you. This will provide you with peace of mind when you explore the crypto world.
On the other hand, using a USB drive is not a secure device for sending crypto transactions. This is because these sticks are not able to sign a transaction like a hardware wallet for you since it does not store the private key in it directly.
This means that you will need to type in or copy-paste the private key from the file that holds your key and is stored in the USB drive to sign in and expose it to several different attack vectors in the process.
If you are wondering what you should do if anyone gets hold of your storage device then, if it is a hardware wallet, you really do not need to panic.
This is because the one who has got hold of your hardware wallet does not necessarily mean that they will also get access to your fund.
They cannot unless they have your PIN as well. Instead, you should look for the recovery phrase that you have written before while setting up your hardware wallet and hide it.
Use this recovery phrase to access your crypto funds. You can use a suitable desktop app for that matter. Once you get an access, transfer the funds to a new wallet, create a recovery phrase for it, and keep it safe till you get a new hardware wallet.
On the other hand, if someone gets hold of your USB drive, you cannot afford to take it lightly as you would if you lost your hardware wallet.
You will need to act immediately and access the private key, seed phrases or JSON files, if you have a copy of them that is. Use a desktop app and transfer your funds instantly to a new wallet but make sure that it can be accessed by you only.
How to Use
The working process of the hardware wallet seems to be pretty simple as it stores the private keys. The private key is a very large random number but the crypto coins are stored digitally on the blockchain.
You can access your assets using the hardware wallet which automatically uses the private key stored in it to authenticate you on the blockchain so that you can use your funds.
The main purpose of the hardware wallet is to keep the private keys safe since it is not connected to the internet so that it can be used as your digital signature.
In order to use a hardware wallet, you will have to plug it into your computer and unlock it using a PIN to create a transaction.
There are a few hardware wallets that come with a small screen. This helps in interacting with your wallet easily and in a much better way.
On the other hand, in order to use a USB drive if you do not have any other option to store your crypto offline securely you will have to save the private key/seed phrase/JSON file on the drive.
However, make sure that this is your temporary alternative and also make sure that the USB drive is encrypted. It is also necessary to make sure that you have several copies of your private keys and store them in different places.
This will not only help you in case you lose your USB stick but will also ensure that there is no single-point failure.
There are some significant risks in using a USB flash drive as your crypto storage that may lead to a loss of funds.
These devices can be stolen easily, and, since these are very small in size it is also quite easy to misplace them. These are also prone to malware attacks or the mechanism inside may fail. Even worse, it can be damaged beyond repair.
On the other hand, the risks involved in using a hardware wallet to store your crypto include the shipping process being compromised or secure devices may be modified with insecure replacements.
Also, devices may be substituted and government programs may get in the way. There may also be some issues with the quality of implementation of the hardware wallet depending on the computing devices as well as its hardware.
The other risks in using a hardware wallet include bugs that may allow attackers to sneak in and tamper with the security, malware can send coins to a wrong address by swapping them, the corrupt production process can leave flaws in the device that may be intentional as well as unintentional.
Another significant risk of the hardware wallets is the insecurity of RNG or Random Number Generator embedded in its hardware due to malicious weakening or unintentional error.
This will allow the bad actors to hack into your wallet keys and generate pseudo-randomness using the insecure RNG that may be the same as true randomness.
Which is Better – Crypto Hardware Wallet or USB Stick?
Ideally, there is no perfect solution to choose a wallet to store your coins.
Even then, if you have to make a choice when it comes to storing your coins you can choose any type of wallet but it is important to understand the basics of security.
If you do not, you and your crypto storage, both can be vulnerable to bad actors.
In order to store your crypto coins, you will need safe storage, and looking at all the points of difference above, you may feel that a hardware wallet is a much better solution in comparison to a USB stick. Well, this is true.
Ideally, you should use a USB stick or a flash drive to store your private keys only if you cannot afford to use a hardware wallet right now.
However, make sure that you do get one in the near future to ensure that your private keys as well as your crypto coins are truly safe.
However, a USB stick is not all that bad to use. In fact, the USB drives are supposed to be good air-gap wallets because you can connect them even to those computers that have never been connected to the internet.
These are good options to use if you use them as a pure storage-only memory.
These will not help you in any way in computing. You can also use it as a boot drive to install an operating system afresh with a wallet installed on it.
However, there are a few things that you should remember at this point such as:
- It is best to achieve randomness from a non-reproducible external source
- It is best not to connect to the internet after you download the initial source and build it locally
- You will be better off if you create a USB bootable disk by using Rufus or Ubuntu and boot into Ubuntu
- It is good to create your wallet using an external pseudo-random generator for randomness
- It is better to build the source of an open-source crypto wallet
- Encrypt the drive at all times and make multiple copies of it and replace it yearly.
However, you will find a lot of crypto users and experts suggest using a hardware wallet instead of a USB drive.
There are several good reasons to say so even if you have crypto assets that are not enough to make an expensive hardware wallet worth investing in.
The main reason is that the hardware wallets are less risky to use in comparison to the USB drives, as stated earlier, since it stores the private keys securely within the hardware that is protected by a PIN and allows automatic authentication of a crypto transaction.
The second reason is the nature of cryptocurrencies themselves. These, as you may know, are not bytes that you can store in a USB drive.
In fact, these are simple calculations that reside on the blockchain. You will need to use private keys to prove ownership of your coins and claim them.
Therefore storing these keys in a device that can be lost, stolen, or damaged is certainly not a good idea.
In comparison, a hardware wallet will ensure proper blockchain management and the safety of your private keys and crypto coins.
These wallets will eliminate single-point failure probabilities.
Moreover, the PIN that secures the wallet will ensure that it is deleted after three failed attempts are made by anyone.
If you do your due diligence, such as creating a backup password with which you can create another hardware wallet, theft is not an issue and your wallet is secured.
The bottom line is: ensure the safety of your hardware wallet and follow the rules. Hardware wallets ensure that there are no major data breaches.
However, even the hardware wallets are not perfectly secure. There have been a few security incidents reported where the hackers have even broken into the servers of the manufacturer of the hardware wallet Ledger.
The hackers were able to upload malicious firmware updates. These types of attacks to the supply chain are pretty hard to identify and deal with in comparison to the phishing scams.
Hardware wallets are much easier to use since it offers a nice balance of convenience and security.
It is also due to the rapidly evolving crypto landscape. Therefore, when you need complete peace in your mind regarding your crypto you will need to find one of the best hardware wallets.
At this juncture, it is good to know that every hardware wallet available in the market is not created equal and a few of these may be counterfeit as well. Since these wallets are expensive, you will need to be careful enough when you buy one for yourself.
Here are a few points that you should remember and verify while choosing a hardware wallet.
- Check the company history and choose one that has been in the market for several years.
- Go through the user reviews to find out how secure the product is and how efficiently and reliably it can respond to technical issues and hacks.
- Also, check the number of different platforms and coins supported by the wallet.
- Finally, check the interface. It should be easy to use so that you can update the firmware easily and reset and recover quickly.
To wrap up, you should also make sure that the recovery seed is kept safe, and certainly not in the disk drive or in the cloud, so that you can get a new one easily, in case any unwanted incidents happen.
Also, check the addresses you type in before you confirm the transaction. Make sure that there is no chance of malware to modify the addresses and divert the money flow to an account of a hacker.
Finally, remember that even a hardware wallet cannot guarantee complete safety but with a little vigilance on your part it may prove to be your safest bet.
It is not easy to have the level of safety you want for your crypto storage as desired. You may use a hardware wallet or a USB to store them but for that, you will first need to know the pros, cons, and differences between them.