The crypto exchange market has recently seen the birth of new companies to study before entering the sector. With an ever more comprehensive market offer, it is up to the individual investor to understand the industry’s best operator. Keeping in mind that different traders are better suited to different types of investors, today we will impartially talk about BitYard, a Singapore-born trader. Founded in 2019, BitYard is a cryptocurrency exchange that offers a range of services to its customers, as…
Before investing in fiat financial markets, one of the essential things that every investor must have is a bank account. The account helps in not only storing the investments but also as a way to receive profits made from trade. What about crypto? What is the first thing that every rookie investor must have when joining the crypto space? Well, a crypto wallet.
A crypto wallet is a tool designed to protect investors’ assets as they tread in the crypto space. You cannot purchase crypto assets without having a wallet for storage. Wallets do not necessarily store assets but instead store the private keys, which help in ensuring no one can activate the assets without proper authorization.
Since the introduction of the concept of crypto wallets, more options with excellent features have come up. For instance, there are custodial, non-custodial, hot, and cold wallets.
Another excellent classification of wallets is between hot and cold wallets, with hot wallets being internet-based. This guide will focus highly on the cold wallet world, checking how they work, possible examples, and benefits. Keep reading for more.
What is Cold Storage?
Cold storage is a type of crypto private keys storage involving hard devices to store the keys. It’s the complete opposite of hot storage, which involves storing assets on internet-connected devices. Hot wallets are prone to attacks and other issues.
Contrarily, Cold storage does not leverage the internet. Recently, the use of cold wallets has been growing rapidly, introducing many different types of wallet options.
Types of Cold Wallets
As aforementioned, the devices or tools used as cold storage are not connected to the internet. In most cases, these wallets are not even digital devices. Among the top cold storage ways include;
The popular paper wallet is among the best hardware/cold storage applications of our time. A paper wallet involves writing down the private key on a piece of paper and storing it safely.
When dealing with a paper wallet, you can write several pieces and store them in different places. You can also split the passphrase into two and keep each of the parts in different places. Finally, add a QR code on the paper to make scanning easy for the user’s ultimate simplicity. One disadvantage of paper wallets is that they are easily destructible, and as such, you need to store them safely.
A hardware wallet is another excellent option used in the cold storage of passkeys. It involves using flash disks or other offline disks. You can choose to store the hardware devices in safe storage facilities like banks. There are other projects offering safety deposit boxes. There are recent devices built by different crypto-focused companies which provide hardware wallet options with many encryptions. Among them include;
Another excellent cold storage option is the audio device storage facilities. These are called sound wallets, where you have an encrypted recording of the digital keys. You can use compact disks, vinyl disks, and many more options. After recording your audio, you can now hide or store the devices in a safety deposit box for future use. Like paper, ensure you have a backup copy that you can use in case other inconveniences arise in the future.
Deep Cold Storage
Recently there has been a growth in cold storage methods dubbed deep cold storage. It is where the funds are stored offline; the devices used have never gone online. An excellent example of deep cold storage platforms is Xapo, which stores the largest number of BTC in existence.
The Benefits of Cold Storage
One of the primary benefits of storing crypto assets the cold way is guaranteed safety and security. Once assets are stored in cold devices, they are inaccessible by hackers and other criminals. As such, every cold storage user can have the guarantee that their investments are very safe. Apart from the security, there are other benefits of using cold wallets;
- Easy and highly convenient to use
- Most hardware wallets are not easy to copy data from
- You can fully control your wallet and funds
- Some are immune to computer malware
- Supports multiple crypto assets
- Some digital collet systems have advanced encryptions
Drawbacks to Cold Storage
Although cold storage facilities have vast applications and advantages to crypto users, there are still several disadvantages that come with them. Among the drawbacks include;
- Some of these devices are prone to malfunctioning
- Most of these platforms are not waterproof
- Once the data is lost, it’s almost impossible to restore
A crypto wallet is an essential thing that every upcoming crypto investor must have before making any moves. There are multiple types of crypto wallets known to enthusiasts, but this guide has focused on the most secure and reliable wallets, cold wallets.
There are several types of cold wallets including, paper, hardware, sound, and deep cold storage wallets. Each of those cold storage tools is unique in terms of security but have their pros and cons.
Every investor needs to consider the type of crypto wallet and select one that suits them. All in all, cold wallets are the safest way of storing crypto.