With Bitcoin leading the way, the virtual currency space has become only stronger and stronger with passing the time since 2009.
There is an expanded usage worldwide as well as frameworks and attempts in place for general acceptance for virtual currencies.
There are more advanced software, forks, and derivatives, besides the rising number of consumers.
Nevertheless, another perspective of this increased popularity has been the resulting rise in hacking and fraudulent methods.
Furthermore, even in these nine years of advancement, we’ve still been incapable of forming a proper and well-defined regulatory rules or methods as which to follow.
This leaves not many sources to the user in case of fraud or theft, which has been evident recently.
Hence, where do you store your precious cryptos?
There are many more than one ways to guard a digital wallet containing keys and passwords to cryptocurrencies and critical financial assets.
It could be achieved via basic encryption technique that is using a strong password, wallet backup,
What are Cold Storages?
Speaking in terms of cryptocurrencies, cold storage means keeping your reserve of digital assets offline. It is an essential requirement for any crypto investor or trader to make
A cold storage cryptocurrency wallet is a hardware wallet that is not connected to the internet. Hardware cryptocurrency wallets generally take the appearance of a USB drive or smartcard.
Rather than generating a private key online, the hardware wallet is designed to create private keys offline. Thus, when your cryptocurrency is being stored in cold storage, it is mostly being stored on a platform that is offline.
It involves storing cyptos away from any kind of internet admittance.
Keeping your Bitcoin offline essentially lessens any kind of threat from hackers. The system of cold storage is decidedly less easy than encrypting or making a backup.
It is normally done by holding some money in exchange for normal spending and saving the rest in a cold storage medium.
This reduces the trouble of sifting out coins from the cold storage now and then for everyday use.
Cold storage is not connected to any web server, which means your investment is always kept secure. Only a small amount of virtual currency stays on the web server.
Cold storage is a non-internet-connected device and program which creates your Bitcoin or Ethereum wallet in a reserve offline.
Also, with cold storage, you own complete control of your private keys, and you have diminished the risk of potentially forming compromised private keys along with many other security risks.
Types of Cryptocurrency Cold Storage
Paper Wallets
A paper wallet is merely a public and a private key printed collectively.
It is an offline wallet and is regarded as a type of “cold storage” which means extra-secure storage that does not make contact with the hackable internet, although it has some critical differences that make its presence in that category debatable.
Paper Wallet is a way to save your cryptocurrencies from hack and theft by printing the private keys and passwords on paper.
This paper has a QR code which can be scanned and added to the software to make quick transactions. It is a good idea to encrypt as well as duplicate the paper wallet as it contains the all-important passwords.
What is usually printed on the paper wallets are the private and public keys, in QR form, with the public keys also serving as the address!
You could copy and paste the keys onto a text document and print that out (erasing the copy on the computer afterwards). Or you could make use one of the free web services that produce the printable wallet for your convenience.
The key formation is usually carried out in your browser. Hence they are never dispatched on the web.
To be safe on the safe side, you should make sure clear your browser soon after you finish printing. Also, you should never save an image of the paper wallet on your PC or mobile phone.
Some of the paper wallet services have a handy design that you can cut, fold and seal, which makes them a weightless and relatively safe form of storing cryptos offline.
You transfer your bitcoin to the public address displayed on the wallet, and then save it in a safe place.
What makes paper wallets safe is that they are offline. They are not within reach of hackers, and your cryptocurrency is never trusted to any third party.
As long as the paper wallet is safe, your holdings are safe.
Pros
- Truly self-contained Bitcoin private keys (when done correctly).
- The wallet never is exposed to malware or any spying viruses.
- Wallet data is not stored on servers.
Cons
- The wallet can still be exposed to theft if not properly stored.
- Wallets can be lost if one forgets where they stored it.
- Wallets can be compromised if one generates the bitcoin addresses using an infected computer.
Desktop Wallets
Desktop wallets are one of the other popular options which are also secure than online wallets. They are usually downloaded and installed on a PC or laptop and are open on the installed device.
Nevertheless, if your computer is affected by a virus, gets hacked or undergoes external damage, there is a chance for you to lose all your funds.
Desktop wallets secure your public and private keys on the installed device, that is yours.
This means that your cryptos are as secure as the PC itself.
If you intend to install a desktop wallet on a PC that is utilized for daily web browsing, having strong firewalls, and anti-malware
PC’s are usually attached to the internet which means that desktop wallets are regarded as thermal storage.
As such, it is advised to store only little amounts of funds on these wallets. As your regular PC isn’t exactly very mobile, people often use desktop wallets for trading and home shopping.
At times people use desktop wallets as cold storage by installing the proprietary software on computers that aren’t always online.
These devices aren’t used for daily browsing and will be connected to the internet only to update its balance or perform transactions
Pros
- A suitable choice for those who trade cryptos from their computers.
- Your private keys are not saved on a third-party server
- If your computer has never been correlated to the Internet, it can be extremely safe.
Cons
- Harder to use your crypto-assets on the go.
- If compared to the Internet, it turns into a less secure hot wallet.
- If you don’t back up your computer and it dies, you lose your cryptos.
Hardware Wallets
Hardware Wallets are becoming an exciting theme among cold storages. These are small, water and virus proof devices and even provide multi-signature transactions.
A hardware wallet is a tangible, electronic device, made for the sole objective of securing bitcoins. The hardware wallet must be combined with your computer, phone, or tablet before bitcoins may be spent.
The three most well-known Bitcoin hardware wallets are:
Ledger Nano S
TREZOR
KeepKey
We have explained about hardware wallets in our previous post
Top 3 Hardware Wallets for Storing Bitcoin
Hardware wallets are a great choice if you are serious about safety and convenience of your cryptocurrencies. Cryptocurrency hardware wallets hold private keys separate from unprotected, Internet-connected appliances.
Your all-important private keys are managed in a secure offline setting on the hardware wallet, fully guarded even if the device is to be plugged into a malware-infected system.
As bitcoins are digital, hackers could, possibly, target your computer’s “software wallet” and steal them by reaching your private keys.
Creating and saving private keys offline using a hardware wallet assures that hackers have no way to reach your virtual currencies. Hackers would have to take the hardware wallet itself, but even then, it can be secured with a PIN code.
Also, you don’t need to worry about your hardware wallet getting robbed, damaged or lost either; so long as you generate a secret backup code, you can always recover your bitcoins.
Pros
- One of the most secure crypto wallet
choices Great for saving large amounts of cryptocurrencies that you don’t need to use on a day-to-day basis
Cons
- Most expensive type of wallet
- Not as user-friendly exceptionally for beginners, but an absolute must for large crypto amounts
USB Wallets
USB flash drives are an instance of hardware wallets. It is storing your keys, or your credentials, which provide access to your Bitcoins or whatever cryptocurrency you use.
This makes it essential that you properly save them to avoid losing your money. You can, however, create an offline wallet to send transactions safely.
Pros
- Easy to use
- Easily available
Cons
- Can’t be restored
- Can be damaged
In the current market scenario, impenetrable storage methods for bitcoins and altcoins and other cryptos are a concept to look forward to, for the future when it is required that cryptocurrencies will be globally accepted as a means of currency.
With an ever-widening range of options, cold storage based assets will be a safe harbour for investors and traders alike.
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