“Not your keys, not your crypto”. We hear this time and time again regarding the private keys which are generated with the digital wallet that you control. Even better than having a private key, is to have your digital wallet in an offline storage device for digital assets. This storage protects the digital assets from a harmful internet environment that is exposed to unauthorized access like cyber hacks and other vulnerabilities.
Cold wallets are like physical wallets for holding cash but in this case, wallets are not physical nor are the currency they hold. They are digital storage tools for cryptos that have a public and a private key. The keys are strings of cryptographic characters that are necessary to complete the transfer of digital assets to and from the wallets.
TYPES OF COLD WALLETS
You can store your crypto in hardware cold wallets or paper cold wallets. Both are offline forms of storage, the hardware is a physical device similar to a hard drive that you can plug into your computer to access funds. Digital assets are not available unless the device is plugged into a computer and accessed with a password.
A paper cold wallet is very safe as well, it involves setting up a wallet offline, and following simple instructions that will enable you to print out the private and public keys on a piece of paper. These keys are printed in the form of a QR code that you can scan to have access to your funds.
Your choice of the cold wallet will depend on how often you use your funds if you use funds regularly, the hardware wallet is the right one for you. But if you are holding or storing your funds for a long time, a paper wallet is the best for you.
If you have heard about the Tyler & Cameron Winklevoss, owners of Gemini Exchange, they have an incredible story about storing their Bitcoin. It has been said that they have stored an immense amount of BTC on a paper wallet QR Code. The QR code was then cut into four pieces, split up and stored in four separate security deposit boxes around the USA. The funds cannot be accessed unless the QR code is re-joined, scanned and imported into a digital wallet. The question that should be asked with paper and hardware wallets is about the security of where you hold your device or paper wallet. Is the location of your hardware and digital wallet flood and fireproof? It should be. A fireproof and waterproof safe is a good way to go rather than in the desk drawer in your office.
WHAT ARE PUBLIC KEY AND PRIVATE KEY?
The public key is comparable to a username and wallet identity that allows other parties to know where to transfer digital coins during a transaction. The private key is similar to a password, it serves as a special access code to the wallet owner. It also acts as a security device that blocks unauthorized access to the digital coins stored inside the wallets.
It is the private key that grants a crypto user the right to ownership of funds in a given wallet address. The blockchain wallet automatically generates and stores the private key once you send a fund from a blockchain wallet. This proves to the entire software network that you are authorized to transfer funds to the wallets address you are sending from.
WHY IS IT IMPORTANT TO USE COLD WALLETS?
Cold wallets are the safest way to hold cryptocurrencies. They have less exposure to risks and are not connected to the internet. They are easily accessible and carried about, but the private keys need to be secured.
Cold wallets are more accessible, as the physical wallet, they could be carried about as an electronic device or piece of paper. These are hardware devices like the USB and can be as close as a second skin. However, this device is offline, so the owner finds it easy to move about with the piece of hardware which can be carried about like a mobile account. Accessibility to the cold wallet also allows the owner easy access to the funds stored inside, just like an ATM card.
The cold wallet addresses the major problem of crypto storage, insecurity. The anonymous nature of the crypto market and the ecosystem makes the crime rate high, thieves and hackers can easily operate. According to statistical reports, in 2018, the total amount lost to scammers equals $9.1 million per day. Presently with the emergence of new cryptocurrencies being launched and the pandemic effect, this number is going higher.
Storing cryptocurrency in cold wallets is a sure way to get out of all these scam attacks, the hardware devices are impenetrable. Your access codes or private keys are nowhere on the internet, so no thief or scammer can access your funds. Some of the hardware devices are so strong that no virus can penetrate even if you plug them into a computer that has a virus, your device would remain safe and secure.
How much is too much value to store on a cold wallet hardware device? You may wish to split up and use multiple hardware devices or store them in separate locations to reduce your risk of loss, damage or other means of losing your digital assets.
Having your coin stored in cold wallets gives you control since you are in charge of the hardware where your fund is stored. You do not need to go through constant checks, confirmation, and verifications that are required by some platforms that offer hot wallet storage before you can access your fund. You can complete transactions by connecting to the internet to send details of transactions you have signed offline.
Cold wallets are user friendly and good for beginners who are not used to the advanced technology involved in using hot wallets. Transactions are very easy using cold wallets, all that is required is to plug in your wallet and follow the given instructions to make transactions.
It is not easy to hack funds stored in the cold wallets, they are protected with pin code, if the wallet is stolen, it cannot be accessed without the pin code. Any attempt to enter a wrong pin code will shut down the hardware after three attempts. Shutting down, in this case, doesn’t mean loss of funds, you can recover by following the restoration details.
TRADING CRYPTO IN COLD WALLET, HOW SAFE?
Cold wallets are safe from hackers and viruses, it is better to keep funds in cold wallets than hot wallets, trading from the hardware is safe as well. You can plug in your hardware on a computer when you want to trade and unplug when you are done. While a hardware wallet is ideal for trading, the paper wallet is considered to be safer. However, it is important to choose your wallets carefully.
The first step to determine the safety of your trading is by choosing the right wallet, all cold storages may perform the same functions but all are not as safe. For the average user, you must ask yourself. Why haven’t I used cold wallet storage for myself? In many cases, you can now trade directly from cold wallets, for example by using the SafePal S1 cold wallet device. It’s available for a mere $39.99 USD at www.safepal.io. For that price, being able to secure your investments and to use them from the device is a winner in every aspect. SafePal also offers an app with iOS and Android users. The cold wallet application is secure, free, and easy to use. It enables you to store, send, and receive crypto with ease, is intuitive, and user friendly.
Generally, cold wallets are important because they help mitigate the risk of theft and scam spreading widely across the crypto industry. To all who trade, HODL or are just getting into the industry, get your assets onto a cold wallet, so that you can enjoy trading and storing your digital assets the safe and secure way with cold wallet hardware devices.