What is a Hardware Wallet?
Bitcoin hardware wallets are simply a secure hardware device, usually connected to your computer via a USB cable, which stores your private keys and protects your money from thieves and hackers. Most hardware wallets cost around $100 at the time this article was published.
Several of the leading brands include ...
There are other brands to choose from, but in this article I will be discussing the KeepKey Bitcoin hardware wallet. My KeepKey arrived within a few days from Amazon.com. It was neatly packaged, included a case, USB cable, passphrase reminder card and instructions.
The setup was fairly straightforward, except one hiccup they did not go into, which left me slightly bewildered and concerned for a few minutes. Upon booting my KeepKey device the instructions stated that I would need to write down my 12 word passphrase and keep it safe. However, I was instead prompted to update the firmware upon boot and was never presented with a passphrase.
When it comes to instructions, I'm what you would call "anal" about following them "to a T". So this left me concerned that I would not be prompted with my passphrase; but my worries were soon relieved after I updated my firmware and rebooted the KeepKey. My passphrase was displayed just as stated in the instructions and I moved on to the next step.
After writing down my passphrase and storing it away safely in my safe, located in my underground bunker (just kidding), I was then prompted to name my wallet and create a 4 digit PIN to access my wallet in the future. When this was completed I was asked to install two Chrome extensions.
The first extension that needed to be installed was the KeepKey Wallet, which let's you connect to your KeepKey hardware device through the Chrome browser.
KeepKey Chrome wallet extension.
Then the KeepKey Proxy extension was installed, which provides a communication bridge between the KeepKey Wallet extension and the KeepKey hardware device.
KeepKey Chrome proxy extension.
Once both extensions are installed, Chrome will now display a new KeepKey Wallet icon in your top browser bar, which is very easy to use. Before sending any Bitcoin the KeepKey wallet extension will prompt you for the PIN you setup earlier. There are nine numbers (1-9) displayed on your KeepKey hardware device whose locations on the keypad will be randomized each time your PIN is required. You correspondingly click a blank keypad on the KeepKey wallet extension in Chrome to verify your PIN using the randomized locations shown on the hardware device.
Randomized PIN display on the KeepKey hardware device.
Enter PIN into the Chrome wallet extension.
The KeepKey wallet allows you to send Bitcoin, receive Bitcoin, view transactions or buy & sell Bitcoin. The Buy & Sell option simply opens up a browser window to LocalBitcoins.com.
Main Chrome wallet screen.
There is also a Settings tab where you can change your wallet label, change your PIN, wipe the device and contact support.
Chrome wallet settings tab.
To send Bitcoin you simply enter the Bitcoin address to send to, enter the amount, then enter your PIN. Once that is completed you will be prompted on the KeepKey hardware device to verify the amount and the send to address by holding down the button on the side of the KeepKey for a few seconds. An animated timer will countdown until a checkmark is displayed and you can move on to the next step. You will then be prompted to once again verify the amount and transaction fee by holding down the button. You can cancel the process at any time.
KeepKey button to verify amounts prior to sending Bitcoin.
Now your Bitcoin is sent!
PROS
- Secure.
- Easy to use.
- Sturdy build.
- 100% Open Source.
- Firmware Updates.
- Can create custom firmware.
- Can create multiple wallets.
- Private keys are never exposed.
- Ships in tamper-resistant packaging.
- If you lose or damage your KeepKey, as long as you have access to the recovery sentence you wrote down during initialization, you can recover your bitcoins on any wallet that supports BIP39 and BIP44, including a new KeepKey.
CONS
- The wallet extension tab will disappear if you click elsewhere on your browser window. Which means you must start over. So copy that Bitcoin address before you open KeepKey!
- The instructions did not explain that you will have to do a firmware upgrade prior to being presented with your passphrase.
TL;DR
Overall I am very satisfied with the KeepKey hardware wallet and would highly recommend it to anyone looking to keep their Bitcoin more secure than holding them in a wallet on your computer.
Update
I've just come across this excellent article by AssieHash titled, KeepKey Under The Hood, which goes into some technical details.