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What are cold wallets?


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Just like you need a wallet to store your cash, you also need one to keep your cryptocurrencies.

The difference with cryptocurrency wallets is that they don’t physically store the coins. The wallet instead keeps safe the public and private keys. A public key is the equivalent of the username, which you share with others who need to transfer you the cryptocurrencies. The private key is like the password that allows you to access the cryptocurrencies stored in the blocks.

But as your wallets start to get thick, you worry a bit more if you lose it or someone stole it.

The same goes for cryptocurrency wallets. As the cryptocurrencies increase in usage, the threat of someone hacking your wallet also grows. In traditional circumstances, to take off the stress, you go and store the money safely in a bank and take a card to withdraw them. In the cryptocurrency world, that means keeping your coins in a cold wallet.

How does that happen? And why you should opt-in for a cold wallet? Stay with me for a few scrolls to learn that. 

What is a cold wallet?

While online wallets have some security such as encryption, backup, and multisig, they are still prone to hacking. If the private key is seized or stolen, there is little hope to get it back. 

There is when the cold wallet came in. 

A cold wallet stores your keys offline. Because the wallet is disconnected from the internet, it is impossible to hack.

The benefits of having a cold wallet

The high level of security of cold wallets is the feature that makes them very attractive to store cryptocurrencies. Because they take longer to access and execute transactions, users usually leave some tokens in the online wallet and deposit the rest in the cold wallet. 

Types of cold wallets

Cold wallets can come in two forms:

  • Paper wallet 
  • Hardware wallet

A paper wallet is technically a piece of paper storing private keys and QR codes needed to access the cryptocurrencies. Because of the risk of losing or damaging that paper, the investors don’t believe this is the best option.

While a hardware wallet is a USB-like device that holds public and private keys. These small and compact devices are virus-protected and waterproof. The users connect the cold wallets to the internet when they need to make transactions and then disconnect when they finish their transactions. If the cold wallet is broken or lost, the users can use a backup seed key to access the funds. 

To recap

  • The best way to store your cryptocurrency is with cold wallets.
  • A cold wallet stores your keys offline, making it top-notch security for cryptocurrencies. 
  • Cold wallets can come as paper or hardware wallets. 
  • Paper wallets are papers that hold private keys and QR codes needed to make transactions. They have a higher risk of being lost or damaged.
  • On the other hand, hardware wallets are small devices that store private keys. It is an offline device that connects to the internet only when the user is making the transaction.