- I moved my crypto from Coinbase Wallet to a hardware wallet for added security.
- Coinbase warned this week that users’ crypto could be collateral in the unlikely event of bankruptcy.
- Hardware wallets add a layer of physical protection and are favored by advanced crypto users.
A few weeks ago I bought some crypto for the very first time so I could buy a cartoon pig.
My Rave Pigs NFT is still in my possession, as is $63 worth of Ether, the second largest cryptocurrency by
and the native coin of the Ethereum blockchain. These holdings were in my Coinbase wallet, a popular software self-custody wallet.
Due to new rules recently established by the Securities and Exchange Commission, Coinbase revealed this week in its first quarter earnings report that in the unlikely event of bankruptcy, the company could absorb crypto held by users on his exchange. In effect, Coinbase users would no longer have access to their holdings and the company would take over balances from the exchange.
Admittedly, this would potentially only affect the Coinbase exchange and not Coinbase Wallet users, as they operate separately. And while Coinbase CEO Brian Armstrong insured users that their funds are secure and there is no current risk of bankruptcy, this got me thinking about how best to store the digital coins. Are exchanges, digital wallets or physical wallets more secure?
I decided to buy a $59 hardware wallet and try it myself. Here is what I found.
The process of transferring crypto to Ledger was generally seamless
I went to a local Best Buy and grabbed the Ledger Nano S because Ledger is one of the most popular companies in hardware storage gadgets. The employee who referred me to them asked me if I was secretly a crypto millionaire. (I’m not.)
The first thing I should note is the Apple-ification of the product, from the packaging to the slim design. If you squint hard enough, it looks like the iPod Shuffle. TO TEAR.
The instructions told me to connect the device to my laptop and download the Ledger Live app. The device showed up in my Mac Finder, and no, you can’t drag random files to it like you would with a USB drive.
I was a bit confused that there was software involved in the installation process. Isn’t the biggest advantage of the physical wallet that it is free from hackable software capabilities? But the app reassured me that Ledger never exposes my private key — or my password to access my crypto — online, even when I’m using Ledger Live.
The first step was to get to know my big book. There’s a small screen on it, and you use the buttons on the side to scroll and click “OK”. I set up a PIN and confirmed it – it’s not my private key, but more of a password just to get into my Nano.
I quickly wrote down my PIN in a safe place. You only have three tries to guess your PIN or you lose access to your assets forever.
Next came my 24 word recovery phrase which created my new unique private key.
“This is your only backup to restore your accounts if needed,” the gadget warned me. “In case of loss, theft or forgetting, all your goods will be irretrievably lost.”
But deleting Coinbase Wallet is not so easy
Then it was time to connect my crypto. There is an option to use an existing software wallet with a Ledger hardware wallet, so I did that first – I simply connected my Coinbase Wallet holdings to Ledger via a Chrome extension on my computer.
Now, nothing can happen to my holdings unless my Ledger is plugged into my computer, and I can view them in real time on the Ledger Live app.
However, part of my goal was to see if I could completely extricate myself and my holdings from the Coinbase ecosystem, even though keeping crypto on Coinbase Wallet is different from keeping it on the exchange.
I transferred my holdings to Ledger and tried deleting Coinbase Wallet, but only got so far – you need to have zero funds in your account before you can delete it, and it costs silver to remove any remaining “dust”.
I will save this task, as well as moving my NFT to OpenSea, for another day.
Bulletproof protection for my small crypto balance
Like everything about decentralized technologies I’ve tried, this process was mildly irritating and the conclusion was a little disappointing.
But I imagine the feeling would be very different for a crypto user with large holdings who can now sleep easier knowing there is more between their money and the bad actors out to steal it.
It’s not that software wallets aren’t safer than storing your crypto on an exchange like Gemini or Coinbase (they are), it’s that users want the safest option possible in an even space. facing security issues.
“The hardware wallet is basically like putting something in Fort Knox,” Douglas Borthwick, chief commercial officer of crypto firm INX, told me this week.
As small as my holdings are, it’s nice to know that I now have that level of protection.