What are hardware wallets and how do they work? Ledger Nano X setup

In the previous article for your training in cryptocurrencies we teach you how to configure and use one of the most popular wallets within the cryptocurrency ecosystem, Metamask. Although we have already given you advice on how protect yourself from potential attacks, software wallets are exposed to attacks that can compromise our funds. So in today's cryptocurrency training we will talk to you about hardware wallets and we will learn how to configure one of the best hardware wallets; the Ledger Nano

What are hardware wallets?路‍♂️ 

Hardware wallets are wallets that store private keys on hardware devices that have a microchip that blocks any unspecified use of the private keys. It is not as people usually understand that crypto assets are stored within the device itself, but rather that said key is stored to additionally protect the funds. 

These types of wallets are the ones that provide the most security, ideal for storing assets in the long term, that is, for the holders. Currently we can find different types of hardware wallets with which to configure our keys, among them the best known are the Trezor and the Ledger.

How do hardware wallets work?⚙️ 

Hardware wallets work in the same way as digital wallets, with the difference that to make any type of movement within our portfolio we will need to use the device to approve the actions. In this way, we can additionally protect our wallet by adding the security layer provided by the validation of actions with the Ledger. 

At the same time, we can also link the use of our Ledger device with our Metamask wallet to be able to interact with different DApps with which to benefit from the DeFi products that we can find in the decentralized ecosystem of cryptocurrencies. We are going to continue the cryptocurrency training by teaching how to configure a hardware wallet, specifically with a Ledger Nano X device.

How do I install and configure a Ledger? 

Well, it sounds obvious but just in case let's remember it. First we must place an order for the Ledger official website of one of the devices they have available for purchase. It is very important to purchase hardware devices from official websites, since you may compromise the security of your funds. The moment we receive our device, we proceed to the configuration:

1. We access the official Ledger page. 

In order to install and create a wallet with the Ledger, the first thing to do will be to download the app from the IOS App Storeat the Android Play Store or from the ledger page. We are going to follow the steps from the Ledger page, although in both versions of IOS and Android they are the same. We access the official Ledger page and in the “Applications and services” section we click on “Ledger Live”.

2. We download Ledger Live (Windows/IOS/Linux). 

We press the “Desktop” button to download the Ledger App for computers. It may be necessary to grant permissions before using it, so we must make sure that we agree with the level of access we give to the app. We proceed to install the App and then run it.

3. We connect the hardware device to the computer.  

As soon as we have completed the download, we connect our Ledger device to the computer using the cable provided to us and begin configuring our wallet. —2022/12/image-12.pngFirst screen that will appear in our Ledger.

4. We configure new device / recover seed phrase.‍ 

We configure the Ledger as a new device (if we have a seed phrase, we must click “use Recovery Seed”) and we establish a PIN code to access the hardware device. This password will be necessary for any action that we are going to perform with our hardware device.

5. We configure the seed phrase.  

In the next step, we are going to protect our wallet with the recovery phrase as we did previously when we set up our wallet in Metamask. We must pay close attention to this step that we are going to carry out next since this step is like the master key to our funds, but in this case, the words that we must write down appear one by one on the Ledger screen.

This step will show us the 24 words that make up our seed phrase. As we taught you in the previous cryptocurrency training, if we lose our recovery phrase, if we lose access to our wallet we will NOT recover our assets. Therefore, we must pay attention to storing our recovery phrase on one or different sheets of paper kept in places where we know with certainty that nothing will happen and that they will be safe.

6. We enter the 24 words to confirm that we have saved the seed phrase.⌨️  

We confirm that we have correctly saved the recovery phrase by entering the words in the order previously provided to us. If you have overlooked the instructions, you can press the back button to write in the order provided by the words.

7. We give permissions to the device when we have finished the configuration.  

Once we have correctly verified the 24 words, the “Allow Ledger manager” message will appear on both screens. This means that we have correctly entered the 24 words in the corresponding order.

We already have our Ledger wallet created and configured.

How do tokens get added to the Ledger? 

The way to add the tokens to the Ledger is different from what we had done previously in the previous training on cryptocurrencies in Metamask. Let's see how to add tokens to our Ledger:

1. Access the “Manager” tab in Ledger Live.  

In the “Manager” interface of the Ledger Live App, a list of different assets appears, where there is a button to download the storage of said token within it. Let's take the example that we download ETH.

2. We set up a new ETH address on our Ledger. 

When we have accessed from the “Manager” tab to create the Ethereum wallet, we click on the “Add account” button to configure a public address of the ETH network. 

3. We name the new Ethereum address that we have created.✍  

The last step we must take to complete the configuration of a new Ethereum address in our Ledger is to name it. When we finish, we will have access to our new Ethereum wallet in our Ledger. Additionally, within the list of the different assets that Ledger supports we can see those that are operational, those that require third-party interaction and those that are not available.

How can I receive a transfer?  

The steps to receive a transfer in our Ledger are not very different from those we explained in the latest cryptocurrency training on Metamask. To make a transfer from a wallet configured through a Ledger, first of all we must complete the steps that we have explained in the previous paragraphs to configure a new address. Next, from the “Accounts” section we select our wallet in which we are going to receive the funds and press the “Receive” button. We accept the action in our Ledger and the address that will act as recipient will be shown below.

What if I am now the one who has to make the transfer? 

As easy as when we go to the mobile application to make a Bizum for a friend, but in this case our money is safe from the censorship of the banks. What we must do is go to the “Send” tab and select one of the wallets configured previously and add the shipping address. 

 

Next, the tab appears where we will see the drop-down list of network rate parameters, the amount we want to send and the selected token. 

(THE ADDRESS MUST MATCH ON THE TOKEN AND THE NETWORK).

In the screenshot below, we cannot complete the transaction since we do not have funds from the native blockchain token to pay the network fees to process the transaction. It is very important that we always have enough funds of the native blockchain token to ensure that we can afford these fees (BNB for the BNB Smart Chain network, MATIC for the Polygon network, AVAX for the Avalanche network...). Finally, we confirm the transaction on our Ledger device and the transfer will be executed immediately:

Can I buy crypto assets from the Ledger? 

Of course, we have different options available to make cryptocurrency purchases from our Ledger device. You can consult from the same Ledger page (Apps and services < Supported services) the options available to make cryptocurrency purchases, such as BTC Direct, Banxa, Coinify, LoopiPay, Mercuryo, Moonpay, Simplex, Transak, Wyre and Zerion.

Is there a way to swap the tokens I have? 

Of course, Ledger has an integrated swap service that allows the exchange of crypto assets within the same wallets. It is worth remembering that the assets that we are going to make the swap must be available on our device and at the same time we must also have the native tokens of the blockchain where the exchange is carried out in order to be able to pay for the network fees. Available options are 1inch, Changelly or Para Swap. New ones are regularly integrated, so the options continue to increase. 

At the same time, different services have also been integrated into our Ledger device to access decentralized finance (DeFi) and be able to generate passive income through our crypto assets. The Dapps integrated into Ledger to generate passive income in DeFi range from 1inch, DeversiFi, LIDO, LoopiPay or Zerion. In addition, they have an integration with ZenLedger, a service that allows us to make tax reports to be able to account for the transactions that we must declare to the Treasury, something that is quite worrying since states have found a new way to take more income from taxpayers ( in case they didn't have enough...).

Is NFT custody and trading enabled?️  

Fortunately for you, the answer is yes. The custody and trading of NFTs has recently been incorporated through Dapps such as POAP or Rainbow Me and they are in the process of incorporating one of the largest NFT marketplaces in the ecosystem, Rarible. This way we can secure our non-fungible tokens within our Ledger device and in turn trade them through the options we have available. 

Additionally, Ledger has created a section within its website called “Ledger Marketplace”, a service to provide artists and brands with the possibility of launching their NFT collections safely. As we are seeing in all sections of this cryptocurrency training, Ledger is putting itself at the forefront of the ecosystem to provide all types of services to stop depending on centralized platforms and start using decentralized and self-custody options.

And how do I connect Ledger to Metamask? 

As we had mentioned in the cryptocurrency training on Metamask and in this same one, we can use our Ledger within a Metamask wallet by granting it permissions for a period of time, always being verified through the hardware device. From the Metamask application, we select the personal icon and click on “Connect Hardware Wallet”:

Next, it will let us choose between 4 types of connection to physical wallets, we select the Ledger and we continue: Once we have selected the wallet that we are going to link, we connect to our wallets and select the ones that we are going to unlock: And quickly and easily, we have already managed to connect the wallets that we wanted to view from our Ledger to Metamask. If you have completed the steps correctly, you will be automatically redirected to the home screen of the wallet that you have linked, like this:

Is there any debit card service available on Ledger? 

At the moment it is one of the few answers that we have to leave as negative. But for the moment, since Ledger has also been working with Visa for some time to offer debit cards to be able to make purchases with our crypto assets. Although at the moment it is being developed and it only allows us to add ourselves to a waiting list for when the debit card service is fully integrated safely. 

If you are interested, you can do it from the following link. As a strong point, they will offer 2% cashback on purchases you make through a series of crypto assets. Yes, as you read, while the bank charges us commissions even for breathing, Ledger instead returns us money. More points in favor of abandoning usurious banking entities and migrating to the cryptocurrency ecosystem.

Conclusions from this cryptocurrency training on hardware wallets.  

After finishing this cryptocurrency training on hardware wallets, we are going to do a brief review of what we have learned today. The first thing we have done is define what hardware wallets specifically are and how they work. Next we have immersed ourselves in how the best-known hardware device in the cryptocurrency ecosystem works, the Ledger. We have learned how to configure it from scratch, how to add tokens to the device, and how to receive and send cryptocurrency transactions. We have also seen the purchase and swap options that we have within the Ledger ecosystem itself, as well as the integration of NFT custody and trading services that are being recently incorporated. Finally, we have also learned how we can link our Ledger device to Metamask to be able to interact with the ecosystem's decentralized applications, as well as the innovative debit card service that they are developing jointly with Visa.