Cryptocurrency Cold Storage: What it is, And Why You Need It
In the world of cryptocurrency, users need to be sure that their digital coins are safe at all times, hence the need for cold storage. Cold storage refers to keeping the reserve of cryptocurrencies in the offline environment. It becomes a must in case you are dealing with large amounts of Bitcoin or other digital currencies.
It’s worth keeping in mind that crypto assets come with considerable security risks these days which could easily diminish your investment. Investing in crypto cold storage will ensure that you have a flawless storage system that ensures maximum security and safety for your digital assets.
Cold storage is often seen as the most secure way of storing digital currencies. Industry pundits consider it mostly safe as it is away from any Internet access. Keeping your assets offline substantially reduces the threat from hackers’ attacks. The method of cold storage is less convenient than encrypting or taking a backup; so, usually it is done by keeping some tokens in the system for regular spending and putting the rest in a cold storage device. This practice also reduces the effort of digging out coins from the cold storage every now and then for everyday use.
Among the most common methods of cold storage there are:
- Paper Wallets are a safe way to guard your investment against hackers and computer malfunctions. It involves printing the public and private keys on a paper which you can store. These printed keys are in the form of QR codes. Every time you need to make a transaction or exchange, you can scan the QR code. Since you are storing the keys with you away from the web server, there is the least possibility of it being stolen as long as you keep the QR codes safely.
- Hardware wallets are a form of cold storage too. There are several different hardware wallets available such as Trezor and the Nano Ledger S being the most popular. Both work more or less the same: they come in the form of an USB device with a small screen which allows you to create and set up a digital wallet that can be taken offline when not in use. Various levels of security come with this option, so even if it is briefly connected to a computer for transacting, chances of having private keys stolen are significantly low. This option is an essential tool for people holding significant amounts of crypto funds.
Ultimately, the most critical aspect is that as much information as possible is kept offline and disconnected from the Internet when not in use. If your computer is attacked by a keylogger or ransomware or if an exchange server is compromised, your separate offline device will still be safe with your cryptocurrency. There are many other layers that exist or can be added to increase security even more and people are willing to invest in flawless engineered devices to keep their investments safe. So, good news is there is an incentive to keep developing hardware wallet security for users who truly care about their money.