How does a Ledger work? A complete guide to a secure crypto wallet

With the explosion of cryptocurrencies, the issue of security has become central. How can you effectively protect your bitcoins, ether, or other tokens against hacking and online scams? This is where hardware wallets come in, and more specifically, Ledger, a French company that has become a world leader in this field.

A Ledger is a physical device (hardware wallet) that allows you to store your cryptocurrencies offline, away from the risks associated with exchange platforms and cyber attacks. But how does a Ledger actually work? Why is it considered one of the most secure solutions for crypto investors?

In this guide, we will detail step by step how a Ledger works, its features, advantages, and limitations, as well as practical examples of its use.

Key points

• A Ledger is a hardware wallet that secures cryptocurrencies offline.
• It relies on security via a private key stored on the device.
• It allows you to send, receive, and manage your cryptocurrencies via the Ledger Live app.
• It’s a recommended solution for protecting your investments against hacking.

Definition and origin of Ledger

Ledger is a French company founded in 2014, specialising in digital asset security. Its flagship product is the hardware wallet, a small device resembling a USB drive that allows you to securely store and manage your cryptocurrencies.

Ledger’s main mission is to address a major problem in the sector: the vulnerability of online wallets (hot wallets) to cyberattacks. With a Ledger, the private key – the essential element that proves ownership of a cryptocurrency – is stored offline on the device.

Ledger offers several models:

• Ledger Nano S Plus: an affordable version, ideal for beginners.
• Ledger Nano X: a more advanced model with Bluetooth, designed for mobile use.
• Ledger Stax (new model): features a touchscreen and optimised ergonomics.

👉 Example: An investor who owns 5,000€ worth of Bitcoin on Binance is exposed to the risk of the platform being hacked. By transferring their BTC to their Ledger, they retain full control thanks to their private key, which is inaccessible to third parties.

How does a Ledger work in practice?

A Ledger is based on a simple principle: separating the private key from the internet. It’s the private key that allows you to sign transactions and prove that you own your crypto. If it’s compromised, your funds are lost.

With a ledger, the private key never leaves the device. When a user wants to send crypto, the transaction is generated on the Ledger Live app (on a computer or mobile device) and then transmitted to the Ledger. It’s on the Ledger itself that the cryptographic signature is performed offline. Once signed, the transaction is sent back to the app to be broadcast on the blockchain.

👉Practical example:

1. You connect your Ledger to your PC and open Ledger Live.
2. You enter the recipient’s address and the amount to send.
3. Ledger Live transmits the request to your Ledger.
4. You physically verify and confirm the transaction on the Ledger’s screen.
5. The Ledger signs the transaction with the private key stored in its secure chip.
6. The transaction is sent over the blockchain network.

This way, even if your computer is infected with a virus, your cryptocurrencies remain protected because the private key never leaves the device.

What are the advantages of a Ledger?

Using a Ledger offers several major benefits for cryptocurrency investors.

1. Maximum security: Your private keys are stored in a secure chip (Secure Element), also used in biometric passports.
2. Protection against hacking: Even if your computer or smartphone is compromised, a hacker cannot access your funds.
3. Complete control of assets: Unlike a centralised exchange, where your funds depend on the platform’s solvency, with a Ledger, you are the sole holder of your cryptocurrencies.
4. Multi-asset compatibility: Ledger supports over 5,000 cryptocurrencies and tokens (Bitcoin, Ethereum, Solana, USDT, etc.)
5. Intuitive interface: Thanks to the Ledger Live app, you can easily manage your cryptocurrencies, track their value, and interact with DeFi and NFTs.

👉Example: A user who holds Bitcoin, Ethereum, and stablecoins can manage everything from a single Ledger, without the need for multiple wallets.

Risks and limitations of a Ledger

Even though a Ledger is one of the most secure solutions for protecting your cryptocurrencies, it is not without limitations.

• Risk of device loss or theft: If you lose your Ledger, you won’t lose your cryptocurrencies as long as you have noted down your seed phrase. However, without this backup, your funds are permanently inaccessible.
• Phishing and scams: Hackers often target Ledger users with fraudulent emails or websites. The danger doesn’t come from the Ledger itself, but from users who mistakenly provide their seed phrase.
• Learning curve: For beginners, installing and managing a Ledger can seem complex at first.
• Price: A Ledger costs between 79€ and 149€, which may discourage small investors. However, this cost is negligible compared to the risk of losing several thousand euros due to a hack.

👉Example: In 2020, many users received fake emails pretending to be Ledger, asking for their seed phrase. Those who provided it lost their funds, even though the Ledger had never been compromised.

Comparison with other storage solutions

To better understand the benefits of a Ledger, it’s helpful to compare it to other crypto storage methods.

• Exchange wallet (hot wallet): Your crypto is stored directly on the platform (Binance, Coinbase, Kraken). Advantage: Ease of use. Disadvantage: Risk of hacking or exchange bankruptcy.
• Software wallet (Metamask, Trust Wallet): Your keys are stored on your computer or smartphone. Advantage: Free and convenient for interacting with DeFi. Disadvantage: Vulnerable to malware and phishing.
• Paper wallet: Your keys are printed on paper. Advantage: Offline security. Disadvantage: Fragile, risk of loss or damage.
• Ledger (hardware wallet): Your keys are stored in a secure, offline chip. Advantage: Maximum security, complete control. Disadvantage: Purchase cost and training required.

👉 Comparative example: An active trader can use Metamask to interact with DeFi, but store their main assets (BTC, ETH, USDT) on their Ledger to avoid any risk of hacking.

Concrete examples of using a Ledger

A Ledger isn’t limited to simple storage; it also allows you to interact with the crypto ecosystem.

1. Send and receive crypto: In just a few clicks, you can transfer assets from your Ledger Live.
2. Manage your investments: Ledger Live displays the value of your portfolio in real time and allows you to buy or sell crypto via integrated partners (MoonPay, Coinify).
3. Access DeFi and NFTs: By connecting your Ledger to Metamask, you can interact with DeFi protocols (Uniswap, Aave, Curve) and secure your NFTs.
4. Separate trading and long-term storage: Some users keep a small portion of their funds on an exchange for daily trading and store the rest on Ledger for long-term storage.

👉Practical example: An investor holds 2 BTC. They decide to keep 0.1 BTC on Binance for trading and transfer 1.9 BTC to their Ledger for secure storage.

Ledger’s impact on cryptocurrency security

Ledger has profoundly transformed the way investors store their crypto. Before the advent of hardware wallets, many individuals lost their funds due to exchange hacks or management errors.

Today, thanks to Ledger and other similar solutions (Trezor, KeepKey), users can truly apply the golden rule of crypto: “Not your keys, not your coins“.

Furthermore, Ledger has expanded its ecosystem with:

• Ledger Live: an intuitive application that simplifies the use of the hardware wallet.
• Partnerships with DeFi and Web3 players: to allow users to secure their NFTs and their interactions on the blockchain.
• Growing adoption: more and more financial institutions and fund managers are using cold storage solutions like Ledger.

Conclusion

A Ledger works on a simple but powerful idea: storing private keys offline, in a secure device, to protect cryptocurrencies from hackers and the vulnerabilities of centralised platforms.

Thanks to its secure chip, the Ledger Live app, and its compatibility with thousands of cryptocurrencies, Ledger has established itself as an essential solution for both retail and institutional investors.

While the device comes at a cost and requires a certain level of rig in its use (backing up the seed phrase, being vigilant against phishing), the advantages in terms of security and total control over your assets make it an ideal solution for anyone serious about investing in cryptocurrencies.

In summary, if you hold cryptocurrencies for the long term, using a Ledger is undoubtedly one of the best decisions you can make to secure your investments. It’s an essential tool in a responsible crypto strategy.