The Dark Side of Hardware Wallets

This is a guest post from contributor ITK Solutions. If you’d like to submit your own content on the site, please click here.

So you drank the Kool-aid. You bought the meme. You have bought the rumor and now, you have sold the news. Drinking said Kool-aid was difficult. There were numerous industries you had to have an understanding of in order to be able to see the capability, technology, economics, and potential that Crypto has to offer. Buying was the easy part – Coinbase took care of all of that for you. You entered your bank details like a good citizen and bought your first bit of crypto. This was the proverbial first step onto the ladder that led down the rabbit hole.

It’s an odd kind of portfolio that only moves upwards.

You found out about ICO’s, to your detriment, but mainly to your benefit.  Let me be the first to congratulate you on your success. You are now in possession of a sum of cryptocurrency that needs to be secure. We all know exchanges should not be trusted (see Mount Gox.) and that the advantages, from a security perspective of using a hardware ledger far outweigh the shortcomings. But what about the real time disadvantages of using a Hardware Wallet? What could it cost you?

We can all agree, anyone with a substantial crypto holding needs to protect their stash. There are a number of excellent products on the market to do so. The Ledger Nano, the Trezor, the Keepkey etc. I am not going to compare them for you. There are countless articles out there written by people eminently more qualified than I on which one to buy. What I am here to talk about today is what you lose by gaining such security.

So you’ve gone out and made your purchase. Your mind has slipped to all the “what if” scenarios. What if my exchanges get hacked before it arrives! Sit back, grab a beer and pat yourself on the back for being a responsible crypto user. You did the right thing. You have waited patiently for its arrival and now your newly acquired piece of hardware is sat there in its crisp clean box, when you open it, it beams up to you. You’ve descended well down the ladder and into the rabbit hole my friend. You have changed. You have set it up, hidden your private keys, the knowledge of the Hardware Wallet has been entered into your will and the whereabouts of the private keys and now your entire crypto portfolio is secure. Or is it?

Note from Roy: We at Globalhalo tend to prefer the Ledger. Trezors are great but they don’t have a flippy thing.

Oh, you didn’t realize that your brand doesn’t actually support that shitcoin that you’ve been convinced by Crypto Twitter is going to 10x? I mean does this piece of hardware even understand your darker side? Does this piece of hardware even crypto bro? What you wanted when you bought it was security, but now you are being asked to make a decision. Do you convert your meme coin into something more reputable? Or do you forsake the new you…the one who checks that the front door is locked three times before you go to sleep? Decisions. Do you sell your “free money guaranteed moon mission” for something that you can store on your Hardware Wallet, or throw caution to the wind? You are sat at your desk in your cubicle and it’s time to check the markets.

One of the allures of crypto in itself is the volatility, you love it. Don’t lie to yourself, that’s what we’re here for. It just so happens that when you pull up the exchange, OMG is on a tear, your most faithful of bags. It’s up 50%! You carefully scan twitter, but alas, there’s no news. You look at the chart; it has just gone on a straight moon mission. There is bound to be a retracement. You should sell now and buy back at a lower price. The only setback is that your crypto stash is at home, safe inside its Hardware Wallet, nestled comfortably in your hiding place. You sit there and watch the chart, hoping that the pump lasts long enough for you to get home. But ultimately, we know the truth – it does not. It retraces almost fully. You are up, and you have made profit, but at what cost?

My honest conclusion: I hope that this article does not persuade you not to invest in a Hardware Wallet. They are an excellent and well trusted way for to protect our investments. I implore you to buy one. It is not a matter of doing your research and finding out which Hardware Wallet best suits your needs, it is a matter of understanding the use case for the Hardware Wallet.

It is a tool for the long term holding of crypto assets. It is your safe. Your vault. One thing that is rarely discussed with regard to Hardware Wallets is the changes in investment strategy and mind-set that they encourage. Before buying one, I owned numerous coins on numerous exchanges. I stored all my assets on the exchanges. Now as a personal preference I hold 50% of the assets that I believe have long term potential, the Titans of the Industry, on my Hardware Wallet. The other 50%, I knowingly risk by storing on exchanges as a trading account.

When my trading account grows exponentially I transfer some back to my Hardware Wallet. It is a strategy that has served me well and fits within my comfort levels. I encourage you to start asking yourself what is the strategy which suits you best. What a Hardware wallet will do for you is help you decide what your strategy is. It will make you sit down and make decisions about how you want to invest, how much you are willing to risk, how long you are willing to wait. It will help you set targets and goals for yourself. It will help you realise when you’ve made poor decisions and take action.

When I started out in crypto my biggest mistake was over trading. It was something that needed to be addressed and a Hardware Wallet was the solution. It will lead to a more rounded, decisive, planned you…. in a crypto sense, anyway.


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