Are Hardware Wallets Secure? 3 Common Crypto Scams To Watch Out

The cryptocurrency market may have seen some relief recently, with Bitcoin picking up the pace once again, surpassing the $20,000 mark on Monday for the first time since its last high in November 2022. Despite a persistent negative sentiment, which left many investors worried, experts believe several factors may have contributed to the bullish sentiment in the market this year. However, investors must be careful and understand the potential risks before investing in cryptos. So, storing your virtual digital assets in a safe place, like a hardware wallet, is crucial.

What Is A Hardware Wallet And How Secure Is It?

A crypto hardware wallet is a physical device to store your cryptocurrency offline, making it less vulnerable to hacking. These hardware wallets are not required to remain connected to the internet all the time. Their primary purpose is to keep your holdings secure. 

Edul Patel, CEO and co-founder of Mudrex, says, “Hardware wallets allow investors to keep their crypto assets safely. For example, when you buy crypto in an exchange, the assets are held in the exchange’s private wallet. You do not have ownership of these holdings. However, when you keep these holdings in a hardware wallet, you have complete ownership of these assets.”

According to the report, “Cryptocurrency Hardware Wallet Market By Hardware Component, By Security Method, By Type: Global Opportunity Analysis and Industry Forecast, 2021-203”, “A cryptocurrency hardware wallet is a type of wallet that uses a secure encrypted hardware device to hold user's private keys.” 

As such, “Hardware wallets are designed to allow users to store private keys in a secure section of the micro-controller while safeguarding sensitive data.” 

The report further states that “the main principle behind the hardware wallet is to provide complete isolation between the private keys and easy-to-hack computer or smartphone applications.” 

Hence, “Hardware wallets act as cold storage for confidential keys. The passwords are protected by a PIN, making it tough for hackers to extract private keys” as the data is not on the internet.

Cryptocurrency Scams To Watch Out 

While many investors rightly consider crypto a great way to diversify their investment portfolio and potentially earn high returns, it’s equally important to remember that cryptocurrency can often be highly vulnerable to cybersecurity scams. 

One of the most common forms of crypto scams is rug pull. In this type of scam, a project gains rapid interest through marketing gimmicks and raising massive investments and suddenly stops withdrawals. The developers then drain out the entire fund, Patel says. 

Other scams include phishing, where individuals are tricked into giving away their private keys or seed phrases through fake websites or emails. 

“ICO scams, where fraudulent companies create fake cryptocurrencies or blockchain projects to steal funds from investors. Cloud mining scams, where individuals are promised high returns on investments in crypto mining operations, but the operation is actually a fraud,” Patel says.