Knowledge about cryptocurrency storage methods and spaces is essential for a hassle-free trading experience. The best way to store cryptocurrency is storing it offline. Offline storage spaces such as cold wallets and paper wallets are safe for cryptocurrency storage because they are not connected to the internet, and fraudsters cannot reach them. Offline storage modes are secure and highly accessible.
This article will teach you about cryptocurrency offline storage methods and their working.
How to Store Cryptocurrencies in a Cold Wallet?
Cold wallets are special devices where you can store details about the private keys of the cryptocurrencies you own. Cold wallets are used to keep the cryptocurrencies safe from theft by hackers through viruses, malware, ransomware, or other methods.
You will learn further about the steps to follow to keep your cryptocurrencies safe in cold wallets.
- Buy a portable cold wallet device that has Bluetooth connectivity.
- If the cold wallet comes in the form of a USB device, download the corresponding software on your PC.
- You should not forget or lose the seed phrase, which is essential for recovering the data stored in the cold wallet. If you forget the seed phrase and make multiple unsuccessful attempts at logging in, the cold wallet device will format automatically and you will lose all the data stored in it.
- Make sure that you are sending the cryptocurrency to the correct cold wallet address. Sending cryptocurrencies to the wrong wallet address will result in irrecoverable loss.
Types Of Cold Wallet
Cold wallets are non-custodial wallets. That means the private keys of the cryptocurrencies that you own are safely stored in third-party devices. The users of the wallet have cent percent control over their data with an opportunity for instant withdrawal of funds. Paper wallets, hardware wallets, software wallets, and sound wallets are the commonly used types of cryptocurrency cold storage methods.
Paper Wallet
As the name suggests, crypto paper wallets are physical documents that have public and private key details written on them. It is the most basic method of offline storage of cryptocurrencies. The private keys are removed from the network and are stored in print form. However, the tokens remain in the network and cannot be accessed without these private keys. The paper wallets may also contain a barcode that can be scanned for easy access to the cryptocurrencies. A major drawback of the paper wallet is that it is susceptible to theft, and loss during environmental disasters, degradation with time, or loss through other means.
Hardware Wallets
Hardware wallets are physical devices used to store private keys offline. Hardware wallets resemble smart cards or USB devices. Hardware wallets also have a computer and Chrome-based app to help in storing the private keys offline. In water-proof and virus-proof devices, there are also multi-signature features that help in providing advanced protection.
Software Wallets
Software wallets are usually connected to the internet and are not widely used for storing private keys. However, there are offline software wallets that resemble hardware wallets and are not connected to the internet. The offline software wallets are divided into two accessible parts: an offline wallet for storing the private keys and an online wallet that has the public keys stored.
Sound Wallets
Sound wallets are cold storage devices where the private keys of your cryptocurrencies are stored as sound files on CDs or USB drives. The cryptocurrency private key data stored in such sound files are retrieved using a spectroscope.
The Bottom Line
Cold storage or offline storage facilities are important for storing the private keys of your cryptocurrencies safely. As they are kept away from internet connectivity, they are safe from cyber attacks, thefts, or online hacking attempts. The only risk concerning cold storage devices is that you may lose them due to environmental degradation, physical thefts, or loss. Even then the private keys will be safe and inaccessible to others.
Cold storage devices and techniques are important in the storage of cryptocurrencies as they are valuable assets and are vulnerable to theft or loss. If you are a frequent crypto user, it is worth investing in cryptocurrency cold wallets to secure your assets.
