Colibri is a free and open source DIY project, with the goal to enable everyone with $5 and access to a laptop and Internet™ to create their own secure crypto hardware wallet, using off-the-shelf ESP32 hardware development boards.
Head over to colibri.diy to find build instructions and more information!
Just released v0.0.3 of colibri.diy - new features include Ethereum transaction signing and basic Bitcoin support <3
Now working on a companion webapp to ease device setup, and the first 3rd-party wallet integration. Please let me know what you think!
I appreciate the curiosity :) Let me answer your first and last question first: A hardware wallet acts as a store for your keys, with the premise that they cannot and will never be extracted from said device. A "software wallet" or app (like Metamask) which runs on a phone/PC might be exposed to vulnerabilities of the underlying operating system or environment. Your PC might be exploited, and someone steals the keys stored in the app you're using to sign, or injects bogus input into the signing process, etc.
In contrast to that, a hardware wallet is only sent the data to sign, returns the signature, and never exposes the keys to anything connected to it. In the case of Colibri, it has a BLE interface and you can pair your PC or phone, then send commands in JSON-RPC format. Sensitive commands (like signing) require approval on the device, by pushing a physical button.
Ideally, this process is integrated into a software wallet, to have a GUI to prepare and send your transactions, and double-check and sign them on the hardware wallet - I'm working on a proof of concept integration via a MyEtherWallet.com fork for this.
So the flow would be something like