- I moved my Coinbase Wallet encryption to a hardware wallet for added security.
- Coinbase warned this week that user encryption could be a guarantee in the unlikely event of a breach.
- Hardware wallets add a layer of physical protection and are favored by experienced cryptographic users.
A few weeks ago, I bought crypto for the first time so I could buy a cartoon pig.
My Rave Pigs NFT is still in my possession, as well as $ 63 worth of ether, the second largest cryptocurrency in
and the native currency of the Ethereum blockchain. Those holdings were located in my Coinbase portfolio, a popular software self-custody portfolio.
Due to new rules recently established by the Securities and Exchange Commission, Coinbase revealed in its first quarter earnings report this week that in the unlikely event of bankruptcy, the company could absorb the cryptocurrencies held by users in its exchange. In effect, Coinbase users would no longer have access to their holdings and the company would take over the stock market balances.
Of course, this would only affect Coinbase exchange and not Coinbase Wallet users, as they work separately. And while Coinbase CEO Brian Armstrong insured users that your funds are secure and that there is no current risk of bankruptcy, made me think of the best way to store 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 cryptography to Ledger was mostly smooth
I went to a local Best Buy and picked up the Ledger Nano S, as Ledger is one of the most popular companies offering hardware storage tools. The employee who addressed me asked if he was secretly a millionaire crypto. (I’m not.)
The first thing I have to highlight is the Apple-ification of the product, from packaging to fine design. If you close your eyes tightly, it looks like the iPod Shuffle. RIP.
The directions prompted me to connect my device to my laptop and download the Ledger Live app. The device appeared in my Mac Finder and no, you can’t drag random files to it as if it were a USB.
I was a little confused that there was software involved in the setup process. Isn’t it the biggest advantage of the physical portfolio that is free of hackable software capabilities? But the app assured me that Ledger never exposes my private key or password to access my encryption, online, even when using Ledger Live.
The first step was to get to know my Ledger. There is a small screen and you use the side buttons to scroll and click “OK”. I set up a PIN and confirmed: this is not my private key, but a password just to enter my Nano.
I immediately entered my PIN in a safe place. You only have three attempts to guess your PIN, otherwise you will lose access to your resources forever.
Then came my 24-word recovery phrase that created my new unique private key.
“It’s your only backup to restore your accounts if needed,” the gadget warned me. “If they are lost, stolen or forgotten, all their property will be irretrievably lost.”
But removing Coinbase Wallet is not that simple
Then it’s time to plug in my encryption. There’s an option to use an existing software portfolio with a Ledger hardware portfolio, so I did it first: I only connected my Coinbase Wallet holdings to Ledger using a Chrome extension on my computer.
Now, nothing can happen to my funds unless my Ledger is connected to my computer and I can see them in real time in the Ledger Live app.
However, my goal was in part to see if I could get out completely and my possessions from the Coinbase ecosystem, although keeping cryptocurrency in Coinbase Wallet is different than keeping it in the exchange.
I transferred my possessions to Ledger and tried to remove Coinbase Wallet, but I only went that far: you need to have zero funds in your account to be able to remove it and it costs money to remove the remaining “dust”.
I will save that task, in addition to moving my NFT to OpenSea, for another day.
Iron protection for my little cryptographic balance
Like everything related to the decentralized technologies I tried, this process was a bit annoying and the conclusion was a bit anticlimatic.
But I imagine the feeling would be very different for a crypto user with large stakes who can now sleep easier knowing there is more in the way between their money and the bad actors looking to steal it.
It’s not that software wallets aren’t more secure than storing your encryption in an exchange like Gemini or Coinbase (well), it’s that users want the most secure option possible in a space still full of security issues.
“The hardware portfolio is essentially like putting something in Fort Knox,” Douglas Borthwick, commercial director of the crypto company INX, told me this week.
As small as my farms are, it’s nice to know that I now have that level of protection.