What is a Cold Storage Wallet?

/What is a Cold Storage Wallet?

Cold storage wallets are here to keep your coins as safe as possible. Find out the details

What is a Cold Storage Wallet? 2018-04-12T08:34:19+00:00
What is a Cold Storage Wallet?

Quick inner navigation:

  1. What is cold storage wallet?
  2. How to use a cold storage wallet
  3. Top 5 cold storage wallets
  4. Cold storage wallets vs hot storage wallets
  5. Other types of wallets

A cryptocurrency wallet is a ‘storage’ where people can keep their cryptocurrency reserves. A wallet can be a physical device, for instance, a piece of paper, a flash drive, a USB, it can be an online wallet on platforms that offer wallet services, an app that can be downloaded on your gadget or a desktop app designed for various computers. In this article, we will mainly concentrate on cold storage wallets and see what they have to offer to their users.

What is cold storage wallet?

One of the basic concepts a cryptocurrency enthusiast needs to know about is cold storage wallet. Cold storage in the crypto world means merely reserving bitcoins cryptocurrencies offline.

Cold storage becomes necessary due to security reasons, especially for those who deal with a large number of bitcoins or altcoins.

The reason why it is not recommended to store large sums of cryptocurrency on hot wallets is that those are online storages. In case of online storages, hackers can steal your coins by hacking the online wallet you are using. Many companies that offer online wallets work very hard to make their platform as secure as possible, however, the risk is always there. This is the primary reason, why a lot of people prefer the cold storage wallet options rather than the hot storage ones. When you get yourself a wallet you will be provided with two addresses – a public and a private one. The public address is the one you are supposed to share with the people or companies that you are executing transactions with. As for the private address – you should never share it with anyone. Those who have your private address can very easily steal your cryptocurrencies stored in the given wallet.

The safety of cryptocurrency wallets even varies within the cold storage wallet category. For instance, some devices are safer than the other ones, or some people prefer paper wallets rather than the devices or vice versa.

Types of cryptocurrency cold storage wallets

As it has been mentioned above, there are several types of cryptocurrency cold storage wallets. Those are:

Paper wallets

As you can guess from the name paper wallets come in form of a paper. These are classified as cold storage wallets as the cryptocurrencies stored through this method are not anyhow connected to the Internet. Paper wallets are very easy to generate and they do not cost any money. It is the printed version of your public and private keys on a piece of paper. Some paper wallets may also have a QR code that you need to scan and add to your software wallet for making the transaction processes fast. As offline wallets they are safe from hacks, however, you need to be careful and watch out for damaging the paper, losing it or sharing it with someone else.

Offline hardware wallet

Cryptocurrency hardware wallets are currently one of the most preferred digital wallets due to the high safety features it offers to its users. The hardware wallets usually need to be purchased beforehand and some of the most reputable ones may be quite costly. However, when it comes to safety a lot of people are ready to pay as much as needed. Some of these devices are even waterproof. Usually, similar wallets support multi-signature transactions. Due to the competitive market of the cryptocurrency hardware wallets, which keeps getting bigger and bigger, many companies pay a lot of attention to the design of the products. As a result, many devices have great designs, good screens, small size but at the same time are convenient to use and so on.

Storage devices and sound wallets (e.g. USB drive, CD, hard drive etc.).

The storage devices are primarily keeping your private keys. The sound wallets keep the private keys in encrypted files such as vinyl disks or CDs.

How to use a cold storage wallet?

First things first, you need to get an offline aka cold storage wallet for yourself. Make sure that the wallet you choose is compatible with the cryptocurrency you are planning to store on it.

Paper Wallets

Getting paper wallets is a very easy and simple process. All you need to do is:

  1. Choose a website where you can generate a paper wallet. There are different websites that allow people to create paper wallets. When you end up choosing a secure website, make sure to check if it supports the cryptocurrency you are interested in. The process is mainly the same from website to website.
  2. Go to the section called “Create a new paper wallet”.
  3. Start moving the mouse of your computer or randomly clicking on our keyboard to make sure that the sequence is completely random.
  4. A couple of minutes after step 3, you will get two addresses. A public address – the one that you can share to make transactions and a private on – that should stay as confidential as possible for the safety reasons mentioned above. Please note that most of the time when people lose their private address they fail to recover their coins.
  5. You can either print out the addresses or choose the option to print out the QR code whichever one is convenient for you.

Hardware wallets

In order to store your coins on a hardware wallet you need to take the following steps:

  1. Get yourself a reliable cold storage device. Make sure it is protected against malware and viruses.
  2. Install the application designed for the wallet if there is one.
  3. Plug your device into your computer through the USB port.
  4. Create, memorize and confirm the pin code that you are going to use later on, in order to access your wallet.
  5. Create a seed – the 24-word random generator that appears to be an encryption standard allowing to have all your confidential keys in your wallet. This seed is very important as it is the only way to recover your coins in case you lose your device.
  6. After the setup process, when you want to use the wallet you need to plug in your device on your computer and enter the pin code.
  7. In order to receive cryptocurrency, you simply need to go to the “Receive” section and copy recipient address. This address should be sent to the payer. Some devices give a QR code instead of an address.
  8. In order to send cryptocurrency, you should put in the address of the recipient along with the amount you are willing to send.
  9. Some wallets may ask for the second verification process, during which you are supposed to put in the codes and the pins as requested.

Top 5 cold storage wallets

Cold storage wallets have become popular over the years. To help you make an informed purchase, we will walk you through the top 5 cold storage wallets.

Ledger Nano S >>

This is one of the most popular cold storage wallets, designed for those who want maximum security for their coins.

It is a physical device designed like a flash drive, and you can connect it to your computer. Cryptocurrency transactions cannot be made on this device without activating it.

Pros:

  • The metallic case attached to it makes it durable.
  • It has a screen.
  • Ledger is excellent for beginners as it is easy to set up.

Cons:

  • It is expensive.
  • You cannot buy or sell cryptocurrencies without the device.

TREZOR >>

This cold storage cryptocurrency wallet is known for the high level of protection it provides to its users. Trezor allows you to keep private keys and sign on transactions while offline.

It is straightforward to set up. It is non-hack-able and you are required to have a password or a username.

Pros:

  • It is one of the most secure cold storage hardware
  • It supports multiple cryptocurrencies.

Cons:

  • Its price isn’t low.
  • The wallet supports mainly the well-known cryptocurrencies.
  • Your coins on this wallet can only be accessed via the device.

Digital Bitbox >>

Its dual storage method makes it a unique cold storage wallet. It uses both USB and micro SD to store and send cryptocurrencies.

The wallet is protected by the software clients which decreases its vulnerability for browser-based clients. Your private key is secured in a high-security chip, making it impossible to extract.

It has several features such as smart verification process.

Pros:

  • It is both Tor and Tails OS compatible
  • The private key is highly secured and cannot be extracted physically.
  • Its two pieces increase its security level.

Cons:

  • There is a possibility that one piece might get lost.
  • It isn’t very durable.

KeepKey >>

Just like the other three wallets mentioned above, KeepKey is very easy to set up and comes with some advanced features.

It is regarded as a premium cold storage wallet due to the high level of security it offers.

Its advanced features are perfect for those of us that are experienced cryptocurrency users. Its designs are minimal; the broad front screen is its most noticeable feature.

Pros:

  • It is the most secure cold storage wallet currently available.
  • It comes with some advanced features like digital screen & metal body

Cons:

  • It is the most expensive amongst cryptocurrency hardware wallets.

Cool wallet >>

This is a cold storage wallet that was developed by CoolbitX Technology. It is unique since it comes in the form of a credit card. Their security levels are very high; which is the reason why cryptocurrency owners use them.

This wallet is the first wireless hardware wallet that makes it possible to manage bitcoin transactions from your smartphone.

Pros:

  • Designed like a credit card, doesn’t need cables to operate.
  • Very high-security level
  • Bitcoin transactions can be made via smartphones.

Cons:

  • It has a partial transparency of software and hardware specifications.
  • At the moment, it only supports bitcoins.

Cold storage wallets vs hot storage wallets

Cold storage wallets and hot wallets differ in several ways; let’s find out what they are.

  • In the case of hot storage, a hack on an exchange platform will result in losses while that isn’t the case when you have cryptocurrency stored in cold wallets.
  • Hot wallets are web-based while cold storage wallets are hardware devices or a paper.

Pros of hot storage wallet:

  • Your cryptocurrency reserve is safe from situations like device theft.
  • It’s free
  • You constantly have an access to your cryptocurrency reserves unless you are connected to the Internet.

Cons:

  • You can lose your bitcoin reserve if the wallet platform is hacked.
  • Not a safe way to store large sums of cryptocurrencies.

Other types of wallets

The list of cryptocurrency wallets does not end there. The increasing demand makes the market develop constantly and come up with improved versions over and over. Here are some other handy crypto wallets:

Mobile wallets >>

Mobile wallets allow you to store your reserve on your smartphone.

Pros:

  • Mobile wallets are very convenient.
  • Those are easy to use.
  • They are accessible most of the time.

Cons:

  • Mobile wallets are vulnerable to hacks.
  • Not a good option for storing large sums of cryptocurrencies.

Online web wallets

Some exchange platforms offer wallet services. In order to use this service, you will need to open an account on the trading platform of your choice.

  • The platforms allow you to buy, sell and store your bitcoin. You can only access your bitcoin reserve on their platforms.
  • These types of wallets store your private keys online; on a computer controlled by someone else and connected to the Internet.

Desktop wallets

A desktop wallet is a software that enables you to send and receive the virtual currency and to store the private key. They are available on Windows, Mac OSX, and Linux, and each wallet comes with its unique features.

To sum it up…

The continued rise in the price of various cryptocurrencies has made it necessary for you to protect them. One of the best ways you can do that is by storing them in a cold storage wallet. We hope this post will help you identify the best way to secure your crypto reserves.

For more on cryptocurrency, visit our other pages and read other informative posts and exciting news.

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