As more people invest in crypto, there’s a growing need for secure storage solutions.
The cryptocurrency industry is far from reaching maturity, yet the number of users who choose to store their funds outside exchanges is on the rise.
The predictions for the next five years are optimistic, as Research and Markets foresees a compound annual growth rate (CAGR) of 24.93% between 2020 and 2025.
This means we might be looking at a $708m market by 2025. So, where is this increased interest coming from and is the market ready to fulfil the demand?
Increased adoption drives demand for wallets
These changes are expected to generate an increase in cryptocurrency adoption at a global level. This will also affect the demand for tools to store digital assets securely.
The advantages of a cryptocurrency hardware wallet
A hardware wallet is an independent device that keeps your crypto in what’s known as “cold storage”. This means that your crypto is stored safely offline away from possible hackers, and you only need a smartphone or computer to plug it in and execute trades.
On the other hand, a software wallet is a non-physical solution that relies on one of your existing devices (your desktop, for instance). These can be convenient solutions, but they can also be vulnerable to malware and hacks.
A cryptocurrency hardware wallet might cost a little more than its alternative (which are often free), but it comes with a series of advantages. Seeing as your funds are offline, they are safe even if your desktop gets infected.
Users also get an extra layer of protection as they can store their private keys in a protected area. No one can transfer these keys out of the device, so it’s hard for strangers to access someone’s funds even if they have the device.
Another feature that makes a cryptocurrency hardware wallet a smart choice for storing digital coins is the overall security during usage. When users need to access their coins, the private keys don’t automatically allow third-party software to see what’s on the hardware.
The steadily growing adoption of cryptocurrency forces the need for secure ways to store and make payments with digital coins. That makes a cryptocurrency hardware wallet a natural purchase for any owner of digital assets.
The disadvantages of hardware wallets
Hardware wallets require cryptocurrency users to step up and take custody of their own funds. This essentially means being their own bank, which can be a frightening concept for many people.
They are also significantly harder to use than a software wallet or exchange. Users must go through the cumbersome process of setting up their wallet, creating a pin, generating a backup seed, and ensuring that the seed phrase, pin, and wallet are safely stored in different places.
These extra steps create a barrier for many users who want the ease and convenience that they have with their current bank or payment app.
Even with a software solution on a mobile wallet, issues can occur – as was highlighted last weekend by Peter Schiff, whose wallet became corrupted and, according to him, he lost access to all the Bitcoin he had ever owned.
If crypto adoption is to hit the mainstream, storage solutions need to become easier to use and have plans in place for situations in which users lose their seed phrases or forget their passwords.
Who dominates the market?
Other hardware wallets that are gaining some market share are BitLox, Coinkite, CoolWallet, CryoBit, Digital BitBox, and KeepKey. It’s hard to tell how many of these have the production capacity necessary to keep up with the growing demand.
Some hardware wallets have the ability to sync with your mobile phone, like the Ledger Nano X. This is convenient as you don’t need a computer to execute trades. However, not everyone likes the interface on the Ledger as much as the colour Trezor screen.
At the end of the day, which wallet you buy comes down to personal preference and how much you want to spend. As the market grows in value, it will be interesting to see how the user experience improves as well.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.