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Author: Admin | 2025-04-28
A bitcoin hardware wallet is a compact, dedicated device that generates and safely stores your bitcoin's private keys offline. Private and public keys are used by your chosen bitcoin wallet software to generate addresses, authorize spending, and safeguard access to your funds on the blockchain. Keeping your bitcoin keys offline is an integral part of bitcoin security that minimizes the risk of remote attacks and malware stealing your funds. Hardware wallets typically offer a variety of protections to prevent anyone with physical access to the device from accessing the keys inside. Bitcoin hardware wallets (the devices themselves) are also distinct from bitcoin wallets. A bitcoin wallet is a collection of private and public keys generated from a single master private key. A bitcoin hardware wallet can be home to several bitcoin wallets. Here, we discuss what a bitcoin hardware wallet is, what it does and doesn't do, how hardware wallets sign transactions, and some of their advantages and disadvantages. What doesn't a hardware wallet do? A common misconception is that a hardware wallet stores bitcoin inside the device. In reality, no bitcoin wallet—software or hardware—stores bitcoin inside it. Instead, all bitcoin stays on the blockchain. Hardware wallets store the keys to bitcoin only. The misconception that bitcoin is held on hardware wallets themselves is so widespread that many bitcoin industry folks recommend not using the misleading term “hardware wallet” at all. However, alternative and potentially more accurate names, such as "signing device" or "signer," have been slow to catch on. Additionally, a hardware wallet cannot check bitcoin balances on the blockchain or broadcast and verify bitcoin transactions. Performing these functions requires separate bitcoin wallet software. (All bitcoin wallets connect to bitcoin nodes to receive, transmit, and validate new transactions.) What does a hardware wallet do? Hardware wallets carry out multiple functions necessary for receiving, securing, and spending bitcoin. When first initialized, hardware wallets (that use BIP39 standards) generate a seed, the cornerstone for constructing a bitcoin wallet. Based on the seed, addresses are generated for receiving bitcoin on the blockchain. Once bitcoin is received, you can use your hardware wallet to sign (authorize) transactions to spend your bitcoin. Hardware wallets can also recover a previously-created bitcoin wallet from a backup seed phrase. Let's look at each of these functions one by one. Generates seeds During setup, most hardware wallets generate a seed for you. This seed, which is a large, randomly-generated string of binary digits, can be represented in human-readable form as a seed phrase. The seed phrase is presented to you during setup as a list of 12 to 24 words. These should be carefully written down in order and saved in a secure offline location. A bitcoin seed phrase backup A seed phrase is not the same as the private key for a bitcoin address. Instead, the seed phrase derives the "master private key" from which all of a wallet's addresses and their associated private and public keys originate. Modern deterministic wallets can generate nearly an unlimited number
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