Bitcoin wallets

Cold storage: Ledger Wallet Nano

So cold storage is important-bitcoins essentially act like cash at that point: If you lose access to your private key, access to your bitcoins is lost forever. Theres plenty of options out there for cold storage, including printing your own paper wallets. Paper wallets are certainly secure if done right, but personally, I wanted to have something a little more robust. 

As far as cold storage goes, the Ledger Wallet does a great job. The Trezor wallet may have more functionality, but that was a little more than I was willing to pay. It comes with a recovery sheet, a security card, a lanyard, and a leather pouch to put the security card in. And although it looks like a regular USB drive, it does have a few tricks up it sleeve: it's higher grade construction than typical NAND, staying useful for 500,000 read/write cycles (about 30 years), and utilizes a smart card for extra security.

Setup was surprisingly easy. During setup, the app (that's actually a Google chrome app) displays some words that you need to write in your recovery card to be used if you lose your drive. Then you use the security card, which has a randomized code unique to that card, to link your wallet to the account. This security card code is required to sign transactions on untrusted computers, which acts as a kind of "private key." Then, on your trusted home computer, you can set up a pin in order to log in easily (3-failed attempts blanks the drive).

Theres also an option to require the use of two ledger wallets in order to gain access, and you can enable two-factor security using a linked smartphone. Personally, I haven't gone as far to get two of them to do this (you can buy them in pairs for still half the price of the Trezor) but I have done the two-factor method on my phone-I haven't had any problems with that.

The whole process actually works really well. I've used this to store coins mined from my hot wallet, and I haven't had any issues with it for the past two months or so that I've been using it. I really appreciate the security and knowing that I can recover my bitcoins if I lose the flash drive. Can't do that with a paper wallet!

There are a few downsides I've found along the way. First, the app, while being very nice-looking and smooth, has limited functionality. Recently, there have been some upgrades with this, but it's still lacking a little. Then there's the fact that the setup process needs to be done on a computer that you can trust 100%. Aside from this, the biggest downside from a security standpoint is a little contradictory. I've read that because the program signs the transaction using part of the code from the security card, if a hacker gained access to your home computer he could reconstruct the security code over time. So apparently, it's actually safer to use a public, malware infected computer than to repetitively use a trusted computer. To mitigate this issue, they recommend that you avoid frequent micropayments (anything less than 25 mBTC).

Click here to check it out on their website.

Pros:

  • Cheap! (~$35)
  • Software works great, can be used on public computers
  • USB drive is made well
  • Security card comes with leather jacket
  • Really easy to use
  • Secure

Cons:

  • Setup needs to be done on trustworthy computer
  • micropayments should be avoided on own computer
  • Software lacking some features