A hardware wallet is the only way to store cryptocurrencies really secure without the need to go through a complicated process. However, there is one big problem: When someone can manage to steel your backup seed or force you to give your pin code, they can steel all your digital assets within minutes and there is no way to get it back.
This is a big risk when you are traveling, living together with other people in one house or when you live in a country where seizure of assets is likely. It can also happen that your bitcoins get stolen this way when someone breaks into your house or forces you to give them your seed. Security starts with privacy, don’t tell everyone!
Hidden wallets will greatly increase your privacy!
Hidden wallets, an exiting security feature
Both, Trezor and Ledger offer the hidden wallet feature. This enables you to set up additional wallets for all the supported cryptocurrencies that have a unique private key. This feature is great, because the hidden wallets are invisible when your device get unlocked with the pincode or backup seed.
This means that someone that forces you to unlock your wallet or steels your backup seed won’t see your hidden wallets and will not be able to know or proof that you have any. Also when your device get seized you can unlock your default wallet and there is no way to proof that you have more funds in your hidden wallets. This is a way to make your bitcoins really unseizable!
How does it work?
The backup seed of a hardware wallet is a row of 24 english words. this seed is created by encryption of the private key. When you create a hidden wallet, you simply add one word (the pass phrase) to the default backup seed and a new private key is created.
Ledger
On a Ledger Nano S you can create a hidden wallet by setting an additional pin. On the Ledger you can only create one hidden wallet, if you set a second one the first one will be deleted and so will the funds on this wallet! I strongly advise to use hidden wallets, but you have to really understand how it works before you get started. HERE you can read more about it.
HERE you can order a Ledger Nano S
Trezor
The Trezor has a better system, you can create an unlimited amount of hidden wallets. With the Trezor you can switch the advanced feature to work with hidden wallets on or off. When you switch it on you will be asked for the passphrase. When you want to open your default wallet you simply leave the box for the pas phrase empty and click through.
When you want to create or open a hidden wallet you enter your passphrase and click through. Now you will be only in your hidden wallet and your default wallet will not be visible. When you have created your hidden wallet you can switch the function off and when you start up you will only see the default wallet. Nobody can ever proof that you used the advanced feature (if you took privacy measures while doing it).
The possibility to create multiple wallets is very useful, since you can spread your funds over different wallets. When someone robs you and it is so threatening that you have to cooperate, you can simply give only one of the pas phrases. It is impossible for the attacker to know how many you have. Also when you send funds your identity can be linked to the wallet. When you have your coins spread, you will only link a small part of your funds.
I really recommend to use this function, it will add to your security level and you will worry less. Make sure you understand this function and know what you are doing before you get started. HERE is the manual.
HERE you can order a Trezor
Make your hidden wallets ‘extra hidden’
Nobody can proof that you have hidden wallets, but when an agency is spying on you while you are creating or using them they probably can. Furthermore, when you hold bitcoins they might be able to figure out that you own them when they can trace them back to the source like an exchange where you bought them. For security and privacy reasons it is desirable that the funds in the hidden wallets can not be linked to you. Here are some measures that you can take:
Use VPN when you work with your hidden wallets to ensure that your IP can’t be linked to your activity. This is a good idea anyway because hackers will never be able to steel your private key (first 24 words) when you work with your hardware wallet because they are segregated from the online environment, but your 25th word can be compromised while using it!
Buy your bitcoins from a source where your identity is not linked to the transaction. This is the case when you buy peer to peer from family or friends, but you can also search for a peer to peer trading partner on market places like Localbitcoins.
When you own bitcoins already and they can be linked to you, you can make them untraceable. This can be done by exchanging Bitcoin for Monero through Shapeshift. Your Monero is now untraceable and it is not possible to link it to you. Now you can Shapeshift it back to Bitcoin and let it be send to your hidden wallet. These bitcoins are visible on the blockchain, but it is impossible to know that they are yours. Another way to do this is through a coinmixer. Both ways will cost you some transaction fees, it is up to you wether it is worth it or not.
When you have a hardware wallet: Use this feature! It will greatly improve your security and make you sleep better!
Disclaimer
Always do your own research before you buy one of these devices or use the advanced features*
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