Beginner's Guide To Hardware Wallets: How Tangem Works

Cryptocurrencies are a rapidly growing asset class, with a total market capitalization exceeding $3 trillion. And as crypto's mass adoption rate and popularity increase, so does the need for secure storage solutions.

Today's secure cryptocurrency storage options include a variety of solutions designed to protect user assets from theft. For example, hardware wallets are impervious to hacking attempts because they store private keys offline. Meanwhile, software (online) wallets use advanced encryption options that cater to a wide range of user needs but still have glaring disadvantages.

This article discusses cryptocurrency's security challenges, the pros and cons of hardware wallets, and why the Tangem is the best among them.
 

Why hardware wallets are important in crypto

One of the most difficult challenges in crypto investing is convincing investors that it is safe. Safety is critical because cryptocurrencies are bearer assets — self-custodial assets that can be traded with others without a centralized third party while being sufficiently liquid, fungible, and portable. There are additional challenges beginners might face, including:

• The learning curve for cryptocurrency can be steep.   
   
• Most investment advisors and brokerages do not yet support cryptocurrency investing, forcing beginners to validate investment opportunities and manage assets independently.   
   
• The volatile nature of the space may cause FOMO (fear of missing out) in opportunistic investors, leading them to relax their guard regarding trusting platforms and "helpful hands."   
   
• As more decentralized applications(dApps) emerge, opportunities for bad actors to manipulate these protocols or exploit security flaws to siphon or steal funds increase.   
   

In the first half of 2024, cryptocurrency thefts surged significantly, with hackers stealing approximately $1.38 billion by June 24, nearly double the $657 million stolen during the same period in 2023. 

This increase was primarily due to a few large-scale incidents, including a notable $243 million heist involving phishing and social engineering tactics.

Eight security risks posed by hot crypto wallets 

Although online wallets and crypto exchanges are convenient for managing digital assets, they pose significant security risks. From the threat of hacking and phishing attacks to regulatory compliance concerns, let's outline the critical vulnerabilities beginners face with custodial wallets.

1. Hacking attacks: Online platforms are vulnerable to cyberattacks and security breaches. If an exchange is compromised, users will lose funds stored in its hot wallet.   
    
2. Phishing attacks: Crypto users may become victims of phishing scams in which they unknowingly provide their login credentials or private keys to fraudulent websites or emails masquerading as legitimate platforms.   
    
3. Social engineering: Attackers may use social engineering techniques to trick users or employees into disclosing sensitive information such as passwords or private keys.   
    
4. Lack of transparency: Some providers do not provide sufficient clarity about their operations, raising concerns about their security and legitimacy.   
    
5. Insider threats: Employees with insider access to the platform may abuse their privileges, potentially misappropriating "stored" customer funds.   
    
6. Risks of regulatory and compliance violations: Online wallet providers and crypto exchanges fall under various regulations, and noncompliance may result in legal issues or shutdowns. In such a scenario, customers must move elsewhere or risk losing their funds.   
    
7. Lack of control over private keys: Many centralized exchanges do not give users direct access to their private keys. Users face a total loss if the platform encounters a problem and abruptly shuts down.   
    
8. Software vulnerabilities: Hackers can gain unauthorized access by exploiting bugs or vulnerabilities in the platform's software. Service attacks can temporarily disrupt online platforms' services, potentially causing users inconvenience or financial loss.

Exchanges are also vulnerable to market risks such as price manipulation, flash crashes, and other types of market volatility, which can affect their operations. Therefore, we strongly recommend using physical devices to store your crypto assets. 
 

What are hardware wallets?

Hardware wallets include various physical devices, from simple USB drives to intricately designed smart cards and wearable rings, outfitted with specialized security and accessibility features for managing cryptocurrency and signing transactions offline.   
 
This type of wallet protects the user's assets by generating and storing the wallet's private keys offline. This means that the keys are not exposed to hackers or malware. In addition to security, crypto storage devices also offer several other benefits, such as:

• Portability: Good ones are small and lightweight, so you can easily take them anywhere.   
• Multi-currency support: Many hardware wallets support multiple cryptocurrencies, allowing you to store all your assets in one place.   
• User-friendliness: The best wallets must be easy to use, even for beginners.

Hardware wallets also have additional security features, including an access code or biometric authentication. Some are unpopular due to their inconvenience, especially for day-to-day transactions, as they require you to plug them into a laptop or desktop computer before you can access your crypto.  

But what if you want a hardware wallet that combines the simplicity and ease of use of online wallets and the fortress-like security of hardware wallets? Let's take a look at Tangem.
 

Tangem: a leader in hardware wallets

Tangem unveiled a next-generation self-custodial model in which the user's private key backup is not on a seed phrase. Instead, the key is securely generated and stored on the wallet itself, which comes in sets of two or three cards or a ring. When you activate a Tangem Wallet, its chip generates the private key inside.   

If you lose one card, your assets remain safe because you have one or two other access code-protected cards. You can make one card your primary crypto wallet, lock the second one in a box, and bury the third card in your backyard — it is as reliable and as tough as a Toyota Hilux truck.   

Tangem has produced over 2,000,000 devices since 2018 and maintains a perfect 0 hack record. Customers also benefit from a 3-minute setup time and the highest level of security for digital assets that exist today.

What is the Tangem Wallet?

The Tangem Wallet is a self-custodial wallet built on a powerful, certified chip developed in collaboration with Samsung Semiconductors. It now supports over 13000 cryptocurrencies. With Tangem, you can easily store, buy, earn, transfer, and swap thousands of cryptocurrencies while enjoying access to dApps, NFT, DEXes, and more—all on one device. Sounds too good to be true? Here's how it works.

How Tangem Wallet works

The wallet has two components. The first is the physical device—a pack of Tangem cards or a Tangem Ring. The second is the Tangem mobile app, available on iOS and Android. Let's see how these two components work together. 

Tangem cards

Tangem cards come in a set of two or three. They are plastic cards with an inbuilt secure chip that functions as a microcomputer. When the card is manufactured, the chip generates its own key pair: the Kcardpriv private key and the Kcardpub public key.  These keys are unique to each card and are not connected to the future user. They're only required so that the card can prove its authenticity and tell the app that Tangem manufactured it.

Tangem Ring

Tangem Ring is a wearable hardware wallet that lets you securely carry and manage your crypto assets on the go. It is made from Zirconia Ceramic, ensuring utmost durability, and is suitable for daily wear. Learn about its features, benefits, and how it works here.

The Tangem app

Because human beings cannot independently communicate and interact with microchips on a plastic card or in a ring, there is a need for an interface or means of communication. That's precisely what the Tangem app is for. The app works as an interface for the physical device. So, how does a credit card-shaped wallet or ceramic ring connect with your mobile phone? 
 

How the Tangem device and app interact

Both components interact via Near-field communication (NFC), a wireless connectivity technology that allows devices to communicate when brought within a few centimeters of each other using magnetic field induction. NFC is based on inductive coupling between two antennas on NFC-enabled devices—your smartphone and the Tangem device—that communicate in one or both directions. 
 

Features of the Tangem Hardware Wallet

Tangem redefines the hardware experience by providing unrivaled security, simplicity, and usability. Users can enjoy complete independence and autonomy while managing their assets with a single tap. Tangem lowers barriers for crypto newcomers while improving the custodial experience for advanced users.

Security

Here's an overview of its security features:

• Anti-counterfeit protection:  The mobile app verifies the authenticity of both the chip and the firmware.   
   
• EAL6+ level: The chip has the highest chip security standard available. It is protected from invasive and non-invasive attacks. Private keys are generated inside the chip during activation. Nobody has access to your private key, and it cannot be revealed under any circumstances, not even the extinction of the human race.   
   
• Audited firmware: An independent audit by Kudelski Security confirmed that the firmware has no backdoors or other vulnerabilities. It is not updatable and has no hidden algorithms.   
   
• Open-source app: The mobile app is open-source on GitHub and has been verified by the community. There are no backdoors, and anyone can recreate the app if necessary.   
   
• Autonomous: Tangem doesn't collect personal data or run servers to conduct transactions on the blockchain. It's just your crypto wallet, the app, and the blockchain.   
   
• Smart backup system: The chip generates a random private key that never gets exposed. The cards and ring establish a secure connection with each other and transfer your encrypted private keys. The keys are stored in each hardware device with no other copies in space and time.   
   
• Access code protection: Tangem Wallets are protected against unauthorized access and brute-force attacks by the user's access code or biometric authentication. 

Reliability

Tangem Wallet is IP69K certified and has Maximum resistance to dust and water. The chip was developed in cooperation with Samsung Semiconductors, Inc. It has a 25-year replacement warranty based on the minimum chip lifetime. The inbuilt chip can operate at peak performance between –25°C to +50°C. It is also protected against EMP, ESD, and X-rays in compliance with ISO 7816-1 standard.

Privacy

Tangem servers are not involved in your crypto operations in any way. All crypto operations go directly to public blockchain nodes or API services. Tangem doesn't collect user data like IPs, addresses, balances, transactions, etc. We also don't require KYC.

Simplicity

Tangem offers a remarkably user-friendly experience, combining cutting-edge technology with intuitive design. Its quick setup, easy interface, and seamless crypto management process make it accessible to both seasoned cryptocurrency enthusiasts and beginners.

• Portable: The cards fit in the pouch where you usually keep your credit/debit card and on your finger, making it easy to carry anywhere. It uses NFC protocol, so there is no need for wires or batteries for charging.   
   
• Durable: Both the cards and Tangem Ring are made from a monolithic material that can withstand everyday wear and tear. It is a chip with an antenna with no points of vulnerability or elements prone to failure.   
   
• Convenience: Easy to use and set up. Just tap the device on your smartphone, enter your passcode or face ID, and access your crypto. Setup also takes 3 minutes.   
   
• Multi-currency support: It supports over 13000 cryptocurrencies, including Bitcoin.   
   
• User-friendly interface: The user-friendly app makes it easy to use, even for beginners.   
   
• Support: 24/7 support via email.

Overall, this Tangem is a secure and user-friendly choice for individuals and businesses looking to store their digital assets securely. If you are looking for a safe and user-friendly hardware wallet, the Tangem is a great option.
 

How to get started with Tangem Wallet

First, you need a smartphone that supports NFC and the official app. You can download the latter from the App Store and Google Play.  Learn more about setting up your Tangem here.

Why you need a hardware wallet

We highlight practical use cases, from securely storing assets long-term to signing transactions daily and ensuring protection against cyber threats.

• Storing assets for the long term: The wallet is a good choice for keeping your cryptocurrency for the long term. It is secure and durable, so you can be sure your assets will be safe for years.   
   
• Keeping your crypto portfolio private: Tangem does not require creating an account or sharing personal information, so you can keep your cryptocurrency portfolio confidential.   
   
• Easy access to your cryptocurrency: Its simplicity lets you send, receive, stake, and swap your cryptocurrency on the go. 
   

Comparing hardware wallets

Let’s compare Tangem to other hardware wallets—we won’t mention them, but they’re pretty popular. We created Tangem using the best technology, so our features are simply in a class of its own. Here’s a comparison table.

Conclusion

Cryptocurrencies are a new and exciting asset class that has the potential to revolutionize the way we store and transfer value. However, with this new technology comes new risks. One of the most significant risks remains online theft and cyber attacks. A self-custodial wallet is the only fool-proof security solution for storing your digital assets. So, if you’re looking for secure and easy-to-use hardware crypto storage, the Tangem wallet is a great option. 
 

FAQ: Beginner's Guide to Hardware Wallets

1. What is a hardware wallet?

A hardware wallet is a physical device designed to securely store your cryptocurrency private keys offline. Unlike software wallets, which are connected to the internet, hardware wallets offer enhanced protection against hacking and malware.

2. Why should I use a hardware wallet?

It ensures your private keys are kept in an offline environment, minimizing the risk of cyberattacks. These wallets are particularly beneficial for long-term holders who prioritize security over convenience.

3. How does a hardware wallet work?

A hardware wallet generates and stores your private keys on the device itself. During a transaction, the hardware's microprocessor signs the transaction offline and transmits it to the blockchain without exposing your private keys.

4. Are all hardware wallets the same?

No, hardware wallets come in different shapes, sizes, and functionalities. Some models are USB-based, while others may have Bluetooth capabilities. The design and supported features vary across brands, so choosing one that fits your needs is important.

5. Is a hardware wallet completely hack-proof?

They are one of the most secure ways to store crypto, but no solution is entirely hack-proof—except Tangem. The device's rigid body makes it significantly safer than its software counterparts.

6. Can I lose my funds if I lose the hardware wallet?

No, losing your hardware wallet does not mean losing your funds. As long as you have your recovery phrase (seed phrase), you can restore your funds on another hardware or software wallet. Always keep your recovery phrase in a secure location.

7. How do I set up a hardware wallet?

Setting up one involves:

1. Initializing the device.
2. Generating a recovery phrase (not necessary with Tangem).
3. Connect the wallet to a compatible software interface and follow the instructions provided by the manufacturer.
4. Set a PIN or Access code.

8. What are the benefits of a physical wallet over software?

• Hardware wallets are safe from online threats like cyber attacks.
• They offer real protection, requiring the user to have the device in hand to authorize transactions.

9. How do I ensure the security of my hardware device?

• Buy your hardware wallet directly from the manufacturer or an authorized reseller.
• Store your recovery phrase in a safe location.
• Avoid sharing your access code or recovery phrase with anyone.

10. Are there any downsides to using a hardware wallet?

The main downsides include:

• Cost: Hardware devices are more obviously expensive than their software counterparts.
• Physical vulnerability: The hardware wallet could be damaged if not kept securely.

11. Can I store NFTs in a hardware wallet?

Yes, many modern hardware wallets support NFT storage. They provide the same secure environment for your NFTs as for cryptocurrencies.

12. Which brands are the most reliable for hardware wallets?

Some trusted brands include Tangem and Trezor. These devices are known for their security features and support for thousands of cryptocurrencies.

13. Do I need a backup for my hardware wallet?

Yes, always create and securely store a backup of your recovery phrase. If your hardware wallet is lost or damaged, this backup is the only way to recover your funds. Ensure the backup is stored securely, such as a safe or lockbox.

14. Can I use multiple hardware wallets?

Yes, you can use multiple hardware devices for added security or to separate your holdings. Some users prefer this approach to manage high-value assets.