Cold storage in the cryptocurrency market is a very common thing, as cold storage in the crypto market is useful for those who want to keep their digital currencies for a long time.
Cold storage is different from other types of storage and storage because the crypto ecosystem is completely new and a bit difficult to understand. But here in the cryptocurrency trading education section, we strive to share the best explanations and guides for this industry in an easy, uncomplicated way.
What are cryptocurrency cold wallets?
Cold storage in the crypto market also known as cold wallets. As is well known if you have the private keys, you are the only one who owns and controls the digital currencies. If you don't own the private key, you don't own your coins.
So, as an important tip:
It is better to store your digital currencies such as Bitcoin, Ethereum, or Litecoin... away from exchanges and hosted wallets, especially in the case of long-term investment and non-speculation.
Where and if you don't, you are at risk of losing all your coins in an instant. Because trading platforms and third-party wallets hold your private keys for you. Which is a huge risk because if something goes wrong with their servers, or if they suddenly decide to shut down, your coins are gone forever. So don't store your coins for more than a day or two with any hosted or third party service.
Which leads us to a question:
Where should we keep our cryptocurrency? What are the most reliable wallets/methods?
This is where the need for cold storage wallets comes in.
Cold storage (also known as cold wallets) means the creation and storage of private keys for cryptocurrency in an offline environment. The online environment is highly vulnerable to hacking, as we keep seeing how ransomware extorts many people around the world. Also, we can never forget the Mt.Gox platform incident. Therefore, in order to avoid such situations, it is necessary to keep digital currencies safe in an offline manner.
Fortunately, the cryptocurrency space has matured a bit, and there are enough cold storage options available.
Below we will learn about:
Best cold storage options for cryptocurrency
1. Cryptocurrency hardware wallets (most secure):
Hardware wallets are among the most powerful cold storage options for cryptocurrency. However, this power comes at a price (some very expensive). A hardware wallet is an electronic device that signs transactions through private keys that are stored offline. It also allows for a refund with a spare primary key in case the device is damaged or lost.
There are 4 popular hardware wallets available in the market and they are:
1-Ledger Nano X
2-Ledger NanoS
3-Trezor
4-cobovault
If you want to safely store your Bitcoin and other cryptocurrencies for the long term, you should definitely order a hardware wallet. Since most of these hardware wallets have a waiting period of a month or two due to high demand, you must order one before the time you want to use it.
If you are looking for a single recommendation as the best hardware wallet for Bitcoin, then look no further than the Ledger Nano X. Bearing in mind that as of the time of writing this article, no theft or loss has been reported from the use of hardware wallets.
2. Paper wallets:
We have already covered how to store bitcoins in cold wallets, how to make a paper wallet, and how to use it. A paper wallet is the cheapest form of cold wallet available that can be easily used.
A paper wallet is free to use and contains a pair of private/public keys printed on a piece of paper. In this storage method, private keys are generated offline, so you don't have to worry about security. Once you transfer the digital coins to the public address of the paper wallet, you are safe.
For different cryptocurrencies, different paper wallet making platforms are available. You can create as many paper wallets as needed using these platforms.
Using a USB drive as a cold wallet is one of the easiest ways to store your cryptocurrency in a cold place. With this, you can export and save your private keys to a USB drive.
But this option comes with some drawbacks, as anyone with access to your USB can access your cryptocurrency. In addition, USB device failures are common.
4. Desktop Wallets:
Desktop wallets are wallets intended solely for your computer. Can be used to export encrypted private key files in an offline environment. In these pieces of software, private keys are stored offline on your device. But while receiving or sending money through it, you are connected to the internet.
The pros and cons of cold storage options
Although all types of cold wallets keep private keys offline, they all have advantages and disadvantages.
Positives:
Very well safe compared to other methods.
It cannot be copied or hacked.
Easy to use, especially on paper.
Availability in different shapes and types.
Negatives:
Some are very expensive.
Difficulty and impossibility of recovery in some cases
There are hundreds of cryptocurrencies in the market now, while some of the cold wallets do not support them.
The possibility of damage or burning.
Difficulty preserving them in some climatic conditions and cases, especially paper wallets.