Cryptocurrencies are set to play a major role when it comes to the future of money. It has been growing exponentially in the usage and the acceptance of virtual currencies. It is digital and uses encryption techniques to control the creation of monetary units and to verify the transfer of funds.
Like we keep cash or cards in a physical wallet, it is stored in a wallet called a digital wallet which is stored in the form of tokens or “coins”. It requires totally a different skill and knowledge to store it safely.
Are you willing to secure your wallet?
Then, it’s time to take your holdings offline. Let’s begin to dig upon cold storage.
What is Cold Storage (or Cold wallet)?
There are many popular ways to secure your wallet but this guide teaches you how to protect your funds using Cold Wallets. It is not connected to the internet and stores your funds offline. This concept is used by investors who want to secure their digital assets for a long term investment.
Amid reports of crypto stolen, lost or hacked with the increasing adoption of crypto assets, comes the need to take your holdings offline. It represents any means of storage that has never been connected to the online world. Most of them know that if you hold your private keys then only you own your crypto coins. A private allows a user to access his or her cryptocurrency. It is a sophisticated form of cryptography.
If you lose your assets, you lose your assets. No third party is responsible and security is your own responsibility. To secure your assets from a number of uncontrollable and potentially unforeseeable events, investors are making a move to cold wallets.
Best Cryptocurrency hardware wallets list
- Ledger Nano S
- Ledger Nano X
- Trezor One
- Trezor T
- KeepKey
Cold storage provides:
- An easy way to transport your coins between various wallets.
- A reliable way to keep your coins offline.
- Increased security protections.
Several options of cold wallets are available in the market:
Cryptocurrency is absolutely here to stay. If you can’t see that at this point, it’s time to learn more about it.
– Joel McLeod –
Hardware Wallets:
A hardware wallet is a special type of wallet that stores the user’s private keys in a secure hardware device. This device is built for the sole purpose of securing your crypto coins. It is one of the most important components in keeping your cryptocurrency secure.
If you want to reduce your risks of losing your money to laptop hard disk failure, malware, hackers, and civil asset forfeiture, a hardware wallet would be good.
A brief description of how it works:
The hardware wallet will ask the wallet software running on your computer or smartphone to provide the payment details like the requested amount and target address.
Immediately after the hardware wallet receives those details, they will await user confirmation, sign the transaction, and then eventually send back a digital signature to the software. This will complete the transaction.
If you want to store your cryptocurrencies securely, then you must definitely have hardware wallets. They won’t expose the private keys even during transactions.
Paper Wallets:
Paper wallets are easy to use and provide a heightened level of security. They are the cheapest form of cold wallets available.
Paper wallets simply refers to a physical copy or printout of your private and public keys. It can also refer to a piece of software that is used to securely generate a pair of keys which are then printed.
A brief description of how it works:
Transferring currency to your paper wallet is accomplished by the transfer of funds from your software wallet to the public address shown on your paper wallet.
Alternatively, if you want to withdraw or spend currency, all you need to do is transfer funds from your paper wallet to your software wallet.
You can also manually enter the private keys or scan the QR code on the paper wallet. This process is referred to as ‘sweeping’.
Desktop Wallets:
Choosing the best desktop wallet is one of the most essential prerequisites for the investor to trade in digital currencies. It can be utilised to send and receive currencies.
It is advisable to choose a universal cryptocurrency desktop wallet which supports more than one cryptocurrency.
Private keys are stored offline in your device but while sending or receiving you are online.
Storing in USB drive:
You can save your private keys in a USB drive. If anyone has access to your drive, then they can access your coins too.
They are compact and easy to carry. However in order to avoid losing or exposing your wallet to theft, keep it safe instead of carrying it around.
Pros and cons of cold storage:
Pros
- No need to rely on an online wallet to keep your cryptocurrency safe
- Less susceptible to hacking attempts
- Full control over your tokens
Cons
-
Eventually you have to attach your device online which is vulnerable
-
Not able to benefit from cloud computing
Remember, blockchain exists online. So when you are making a transaction, it needs to be recorded in the online ledger. During this process, your cold storage device will be connected to the online world to make the transaction complete.
Many hold two different devices that allow them to store and complete the transaction called air gaps. In a simpler way, the offline cold storage device connects to the device that is always online.
If you have lots of cryptocurrency, it is advisable to have a cold storage option and this is the only option to keep your coins offline. You can also make backups of your wallet so that you don’t have to worry about losing your valuable investment.
Disclaimer: Digital Wallets News does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions.
