Why wallets matter
Cryptocurrency ownership is not about a bank balance — it’s about who holds the private keys. Whoever controls the private key controls the funds. Wallets are the tools we use to keep those keys safe. This guide focuses on hardware wallets (like Ledger) because they provide a strong balance of security and usability.
Types of wallets — a quick breakdown
- Custodial: A third party (exchange, service) holds keys. Easy but you trust them.
- Software (hot) wallets: Apps or browser extensions where keys live on devices connected to the internet. Great for daily use, but exposed.
- Hardware (cold) wallets: Dedicated devices that keep keys offline. Best for longer-term storage and large sums.
How Ledger-style hardware wallets protect you
Ledger devices separate the key material from your internet-connected computer. When you sign a transaction, the device shows the transaction details on a secure screen; you confirm by physically pressing buttons. This reduces the risk of remote tampering.
- Secure element stores private keys in a tamper-resistant chip.
- On-device PIN unlock with retry limits.
- Recovery seed (12/24 words) — the only backup to your keys.
- Transaction review on the device display ensures what you approve is exactly what gets signed.
Step-by-step secure setup
Follow these steps to reduce mistakes that lead to loss or theft.
- Buy safely: Get your device from the official Ledger shop or an authorised reseller. Unofficial channels can be risky.
- Initialise directly: Set up the device using its onboard menu. Generate the seed on-device — never on a computer.
- Record your seed securely: Write words by hand on a physical backup. Consider a metal backup plate for fire/water protection.
- Do not digitise the seed: No photos, screenshots, or cloud copies. Digital copies are the most common cause of theft.
- Update firmware safely: Use Ledger Live or vendor instructions and verify the source before updating.
- Test recovery: For high-value accounts, test restoring the seed to a spare device in a safe environment.
Sending and receiving — best practices
Transactions are where mistakes or scams usually happen. Treat each transaction like signing a cheque in public.
- Always verify the destination address and amount on the device screen, not on the computer alone.
- When interacting with dapps, check the exact actions requested — some popups ask permission to move funds or approve arbitrary token spending.
- For large transfers, always send a small test amount first.
Advanced options for power users
- Passphrase: An optional extra word or phrase that modifies your seed to create a hidden wallet. Powerful but increases complexity — losing it means you lose access.
- Multi-signature wallets: Require multiple devices/people to sign a transaction. Excellent for corporate or high-value personal security.
- Air-gapped signing: Use a device with no USB or Bluetooth — sign transactions via QR codes to eliminate direct connection risk.
Common scams and how to spot them
Scammers rely on social engineering — they don't break cryptography, they trick humans.
- Phishing websites mimicking Ledger Live or exchanges. Double-check domain names and never paste your seed anywhere.
- Fake support agents asking for your seed or to install unknown software. Legitimate support never asks for seeds.
- Malicious browser extensions that alter addresses or transaction details. Use minimal trusted extensions.