According to the head of Ledger Enterprise, staking based on a hardware wallet provides more security and freedom than staking with software wallets and crypto exchanges.
As staking cryptocurrencies becomes more and more popular, one might wonder if there are ways to use not only crypto exchanges or software wallets, but also hardware wallets.
By definition, staking allows investors to earn cryptocurrencies without selling their assets, but by delegating cryptocurrencies to a staking validator to support the blockchain. Derived from the word “stake”, the process of staking refers to earning profits and associated passive income from cryptocurrencies through a consensus mechanism known as proof of stake (PoS), as opposed to bitcoin’s mining-based proof of stake. (BTC) mechanism of work (PoW).
With the growing popularity of PoS, staking is becoming more and more popular among online cryptocurrency exchanges and software wallets, and many trading platforms are actively implementing this feature. Some hardware wallet providers have also integrated the staking feature into their portable physical devices.
Ledger, a major provider of cryptocurrency hardware wallets, has been actively working on its staking capabilities since staking debuted in 2019.
On Monday, Ledger introduced Staking for Solana (SOL), allowing investors to earn SOL by using cryptocurrency to support the Solana network.
The new staking feature will be enabled on the Ledger Live app in collaboration with blockchain service Figment, which provides nodes for staking via the Ledger validator. The latest staking addition brings together six coins already available for staking on Ledger Live, including Ether (ETH), Tezos (XTZ), Polkadot (DOT), Cosmos (ATOM), Algorand (ALGO) and more.
Staking through hardware wallets vs. software wallets and exchanges
Staking coins through a hardware wallet has a number of distinct features compared to staking through software wallets or crypto exchanges, Alex Zinder, head of Ledger Enterprise, told Cointelegraph.
“The main difference between using a software wallet and using a hardware wallet is security,” Zinder said, noting that hardware wallets remain “the most secure way for users to take full control of their digital assets.” keep”.
“When staking with a software wallet, you own your coins just like you own your private keys, but the security of your coins depends on an external source of security,” Zinder said. The security of coins used in software wallets depends on the security of the user’s computer or smartphone, the CEO added.
Unlike staking on crypto exchanges, staking through hardware wallets allows investors to truly own and control their crypto assets and gives them the freedom to choose a validator, the registry manager said. On the other hand, staking on an exchange is easier because there are fewer steps in this type of staking, Zinder noted. “You don’t need the required level of education to choose between different validators,” he added.
Cryptocurrency always stays online, even on a hardware wallet
Because hardware crypto wallets are designed to store cryptocurrencies offline, the process of staking coins through such wallets is sometimes referred to as “cold staking” rather than “online staking” through exchanges.
At the same time, storing cryptocurrency on a hardware wallet does not mean that the cryptocurrency itself is offline, Zinder pointed out, explaining:
“It is important for everyone to understand that even if you use a hardware wallet, your cryptocurrency will always remain online on the blockchain. When we talk about hardware wallets, we mean private keys stored in a secure chip in a hardware wallet.”
“When you sign a transaction, for example if you delegate your coins to a validator, that message is passed through the secure element, signed to the nano, and then sent to the blockchain,” the manager added.
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A hardware wallet is a type of non-custodial crypto wallet designed to give the user complete control over their cryptocurrency. Unlike custodial wallets, non-custodial wallets eliminate the need to rely on a third party to recover, freeze, or confiscate a user’s crypto assets. This places the sole responsibility on the user to store private keys to access crypto assets.