What Is a Cold Storage?
What is a Crypto Cold Wallet?
The good news is that the popularity of digital money is growing rapidly. Every day, many people exchange their savings for virtual coins. But in order to do this, first of all you need to know how to choose the right wallet for storage. All cryptocurrency wallets can be divided into hot and cold ones.
What is cold storage? The difference between them is as follows: whether or not an Internet access is required, security directly depends on this. Hot wallets allow you to buy or sell Bitcoin on the exchange at any time. But to use them, you need to be online, which makes the funds vulnerable, and this is especially dangerous when storing crypto, when it is impossible to find and punish criminals and return your savings.
That is why users are increasingly exploiting the best cold wallets in order to obtain high security for the safety of their funds. Their peculiarity is that there is no constant direct connection to the Internet, they work online, but are not designed for regular transactions. It should be emphasized that in the entire history of its existence, a cold wallet has never been broken.
For a better understanding of the essence of a cold storage of cryptocurrency, you can compare it with a safe, which has the highest degree of protection, which is guaranteed by performing certain actions (introducing a special combination of numbers or a fingerprint).
A cold storage is a special wallet that provides secure storage of cryptocurrency. In this case, we are talking about local storage with private keys that allow access to Bitcoin addresses in the blockchain. There is no constant access to the Internet. You can buy Bitcoins or buy ETH on exchanges, for example, and send them to a secure wallet for long-term and safe storage.
Сold wallet vs hot wallet: the main difference from hot wallets is the inability to make transactions at any second. A cold wallet is an offline device and is not intended for permanent use – this is its disadvantage for lovers of frequent asset manipulation and the main advantage of protection, because attackers will not be able to access it.
What Are Cold Wallets Characteristics?
What is a cold storage's main advantage? Outside of being connected to the blockchain and the Internet, they offer protection and security from malware.
They allow safe and efficient storage of large amounts of money.
They do not require the processing of keys by third parties, as is the case with online wallets.
Typically, they have the option to add an extra layer of security with a selected PIN configuration, which prevents third parties from using the device.
Private keys are generated and stored on the same device on which the wallet is used. They never go beyond such a device, so they are kept safe and sound.
They are compatible with most of the available operating systems.
They presuppose the option to generate a seed phrase that will allow you to recover the keys and return the funds.
There are many companies offering different options for protecting cryptocurrencies and it is up to us as users to choose the one that suits us best. Cold storages are the best choice when it comes to cryptocurrencies and their security. The first cold wallets were paper wallets, but with the development of technology, hardware wallets and software wallets have appeared that can create cold storage. This development was necessary in order to ensure the highest possible security of its users.
Cold wallets differ in several types, regarding the implementation of the storage process. Each category has its pros and cons.
Removable storage. A regular flash drive, memory card or portable hard drive can be used to store cryptocurrency. To ensure cold storage, it is necessary, after the private keys are written, to remove the device from the PC slot and store it in a safe place. The best option here is a flash drive with hardware encryption.
These are physical devices known as hardware wallets. They are very easy to use and look like a portable USB hard drive. They do not require an Internet connection, so they are immune to viruses and malware that can attack computers. In addition to many features, they allow you to add an additional PIN or password so that if it is lost, third parties cannot use it.
A hardware wallet is the best long-term storage solution available today. A small device has a high degree of protection and allows you to store several types of tokens at once. The most popular are the Ledger Nano and Trezor, but don't forget the cheaper but no less reliable KeepKey, BitFreezer and CoolWallet. For maximum multi-level protection, you will have to pay from 60 to 200 dollars. This is the main disadvantage of hardware cold wallets. But in the presence of large assets, the investment is fully justified. Among the most famous are Ledger and Trezor.
An easy, secure way to store BTC is to use a paper wallet.These are wallets that provide more security in terms of protection against computer attacks. However, they are prone to spoilage and damage if not taken care of and protected properly. To access coins, you need to have a special image written on paper. The key can be written by hand or printed, in addition, encryption is possible even in QR. To create a paper key, you need to use a special service. But it is important to remember that a paper wallet is easy to lose or damage. Therefore, you should take care to have copies that will be stored in a safe place, inaccessible to intruders.
The best way to store BTC is to use the official Bitcoin Core wallet. It is difficult to argue with this, because its security level is higher than that of any paper or mobile version. But for cold storage, you will need to install software and synchronize with the blockchain. Then you need to specify a password and wait for encryption.
There is an opinion that desktop wallets allow cold storage when disconnected from the network. The developers of Electrum, Jaxx and Exodus have repeatedly announced this possibility. In fact, this is not entirely true. In this case, the user's personal keys are stored locally in encrypted form. The main condition that must be met is not met by a cold wallet, because the main tasks are performed when connected to the network. A cold wallet must be offline. In addition, Electrum and Jaxx have long been compromised by frequent hacks. Exodus is showing its best so far, but it is not cold, therefore, with all the positive components, it does not fall into the category.
A budget option for a cold wallet can be any memory card, portable hard drive or a familiar USB flash drive. But to ensure complete security, after writing the files, they must be removed from the computer slot. The data itself is best stored in password-protected archives.
How To Use Cold Storage Crypto Wallets?
We recommend that you make a written backup of the numbers or keywords that are generated when you run the hardware device configuration. This backup should be kept in a safe and secure place, as it is the one that will allow you to restore funds in case of loss.
Paper wallets should also be kept in a safe and secure place out of sight and access of unauthorized persons.You may not store image formats, PDF documents, files sent by email, or cloud services such as Drive, which are vulnerable to hacking or theft, on your computer.
Paper wallet generators must be downloaded to a computer and must never be run online, i.e. connected to the Internet. If you do not take the necessary precautions, there are many opportunities for hacking, theft and fraud.
There are other options for cold-type wallets, but the options listed are the most reliable, they make it possible to create a secure storage for your savings in virtual coins. And the choice of the best of them depends on your goals and capabilities, you also need to evaluate the advantages and disadvantages of all options. Another tip: if these are small amounts that are not planned to be stored for a long time, you can use a flash drive or a paper version, and to store a significant amount, especially if it is Bitcoins, it is better to give preference to a hardware wallet.