As the title says, members of the CryptoCompare team have chosen the Ledger wallet to hold their private crypto holding, including our Head of Content and members of the content team. In this guide, we want to tell you why this is so.
The cryptocurrency world continues to evolve and cement itself as a part of the current financial paradigm, we continue to see the emergence of several new software and hardware solutions that aim to improve the security and control users have over their crypto-assets. This is an extremely important facet of the cryptocurrency infrastructure as new users will need to feel safe in order to take full advantage of cryptocurrency.
Several companies around the world have been struggling daily to hinder the lives of anyone who illegally attempts to take control of your private keys and coins. To better understand these solutions and what they have to offer, we will briefly discuss some security aspects of current cryptocurrencies wallet solutions. Additionally, we’ll also talk about our favorite solution to keep your coins safe, the Ledger wallet.
Part 1: Cryptocurrency wallets and their flaws
Web Wallets - As the name suggests, web wallets are wallets that can be accessed via the web. These are typically the most known and used due to their intuitive functionalities and easy access, given that users just need to access the wallet page and create an account to start using them. However, with this easy access, a trade-off between simplicity and security usually occurs. For example, with many web wallets, your private keys are stored on a third party server (which means you have given up control over your crypto-assets, your private keys are your identity on the blockchain). Although some web wallets employ advanced techniques such as encryption and multi-sig technology, you are still reliant on a third-party.
Of course, web wallets may be ideal for some entrant users as they usually allow for users to restore their account if the private key or seed is lost but in terms of security, they are the worse solution out there.
Desktop Wallets - In the case of desktop wallet, your security will always depend on the particular software used, since you can have your keys stored on your pc (with or without encryption) or on the server of the program. In either case, it is possible for your keys to be stolen, either from the company’s server or from your own computer. Keeping the private keys on your computer is certainly better than to have them on a third-party server, but it is always possible for someone to gain access to your computer, either remotely or physically, and steal those private keys. In cases where the private key is stored by the user, recovering the wallet in case of loss or theft of private keys is impossible.
Smartphone Wallets - In this case we can point two important factors: UI for Web Wallets will bring the same problems as the web wallets above, and Autonomous wallets end up having the same vulnerabilities as desktop wallets.
USB Flash Drive - Can be easily confused with hardware wallets but are quite different. You can, in some cases, protect your information with a pin by encrypting the drive that contains your private keys. However, if your computer has been compromised, hackers can easily steal your private keys from the unlocked device or use your wallet once you unlock it. Moreover, if you lose the device you can lose all your stored assets forever.
Paper wallet - These can be considered as one of the safest of the bunch, but also the most inconvenient. The fact that you have to write your private key whenever you want to sign and broadcast a transaction is inconvenient to say the least. Furthermore, using your private key to access your wallet will still leave you vulnerable to hacks..
Hardware wallets - Now, we are going to talk about Hardware wallets, which they are certainly the best option to security store your personal assets. Hardware wallets like the Ledger wallet keep your coins easily accessible through a physical device (usually protected by a PIN) while also keeping your private keys safe. Given that transactions are signed within the device, the private key never reaches the computer and is thus safe from hackers.
Part 2: Characteristics and safety measures taken by Ledger
Ledger Nano S is a Bitcoin, Ethereum and Altcoins hardware wallet, based on robust safety features for storing cryptographic assets and securing digital payments. It connects to any computer (USB) and features a secure OLED display to double-check and confirm each transaction with a single tap on its side buttons. With Ledger Nano S, your private keys are never exposed: sensitive operations are isolated inside your hardware wallet within a state-of-the-art Secure Element, locked by a PIN code. Transactions can’t be tampered with, as they are physically verified on the embedded screen with a simple press of a button.
SECURE ELEMENT: Ledger Nano S is based on a dual chip architecture (ST31/STM32, Certification level: CC EAL5+). The firmware integrity is guaranteed by cryptographic attestation.
PIN CODE: Ledger Nano S ensures only you can access your accounts by requiring a 4 digit PIN code each time it is plugged to your computer.
MALWARE PROOF: Initialization or restoration of your configuration is fully done on the secure environment of the Ledger Nano S. Your cryptographic secrets are never exposed to the outside world.
PRIVACY: Your private keys are never held or known by Ledger or a third party: they are hard locked in the Secure Element. With Ledger Nano S, your wallet remains decentralized, you are your own bank.
Ledger Nano S includes Bitcoin, Litecoin, Ethereum and Ethereum Classic companion apps, and other blockchain-based cryptocurrencies. You can send and receive payments, check your accounts and manage multiple addresses for each currency from the same device. Nano S also supports the FIDO® Universal Second Factor standard that simplifies the authentication process on compatible online services such as GMail, Dashlane, Dropbox or GitHub.
Part 3: Companion Wallets
The Ledger Nano S runs dedicated companion applications. To benefit from the latest apps and security features, the Ledger Manager enables firmware updates and browsing through the apps catalogue.
For now the available companion applications are: Bitcoin, Ethereum, Litecoin, Fido U2f, Dogecoin, Zcash, Dash, Stratis, Ripple, Hello, Bitcoin Cash, Komodo, Ethereum Classic, Posw, Ark, Expanse, Ubiq, Pivx, Vertcoin, Viacoin, Neo, Stealthcoin, Bitcoin Gold, Stellar, Hcash, Digibyte and QTUM and more coins are being added constantly (see: https://trello.com/b/5nQ1mdzt/ledger-roadmap)
Part 4: Integrations
Ledger Nano S operates with its own cryptocurrencies wallet interfaces: Ledger Apps (free Google Chrome applications) and a desktop app will be released in July. You can also use other compatible software wallets such as Ledger Wallet Bitcoin, Ledger Wallet Ethereum, Ledger Wallet Ripple, Copay, Electrum, Mycelium, MyEtherWallet, GreenBits or BitGo
Part 5: Conclusion
The most important features in this device will be the fact that you can hold different assets in the same hardware wallet, you can use companion apps such as cryptocurrencies wallets, and also FIDO® U2F, GPG, SSH or build your own applications, see and confirm transactions on the display and confirm with the physical buttons (anti-malware second factor), the fact that the Nano S ledger supports the FIDO® Universal Second Factor authentication standard on Google, Dropbox, GitHub or Dashlane. And most importantly your confidential data is never exposed: it is secured inside the strongly enclosed environment locked by a PIN code but with the possibility of recovering your keys in case of loss or theft, your accounts can be backed up on a recovery sheet . As a result, it is easy to replace any Ledger device or compatible wallets (BIP39 / BIP44)
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