A sharp hatchet or axe is safer than a dull one; it cuts cleanly, whereas a dull one may ricochet off a log and onto your leg. Use a fine, flat file or a grinding wheel to sharpen the blade before each use, then clean and oil the metal before you store the hatchet with the blade covered in one of these ways.
Make a wood or leather sheath and secure it against the blade with a heavy rubber band or strip of inner tube.
Sink the blade into a sturdy block of softwood.
Wrap a rag soaked in oil around the blade and tie it with string.
Slice open a short scrap of garden hose and cover the cutting edge of the hatchet with it.