Unlike paper money, there are more than a few options available for keeping your bitcoin secure.
Whether you’re trading cryptocurrencies on a daily basis or you’re a long-term bitcoin investor, cold storage can be a useful tool for keeping your crypto safe.
Understanding the Basics of the Bitcoin Wallet
In order to get a handle on what cold storage actually is, it’s important to review the fundamentals of the “bitcoin wallet.” In the same way that you can use a traditional wallet to store your paper currency, you can use a bitcoin wallet to store your bitcoin in digital form.
In other words, you can think of your bitcoin wallet as your personal bitcoin mailing address.
This might sound like having a bank account, but it’s actually quite different.
Instead of needing to trust a third party to keep your cryptocurrency secure, you can use a bitcoin wallet as your sole gateway to the decentralized network. There’s no need to ask a branch manager for permissions when you want to transfer bitcoin, there aren’t any annoying forms to fill out, and transfers happen within minutes.
Bitcoin wallets can be used to:
- Pay for items with bitcoin by transferring your payment to merchants who accept cryptocurrency.
- Receive bitcoin deposits from customers, friends, or relatives.
- Maintain your financial privacy by making anonymous purchases.
What is Bitcoin cold storage?
As you can see, bitcoin wallets are incredibly useful. All of this begs the question, however, of how many different types of bitcoin wallets there actually are.
Generally speaking, Bitcoin wallets come in two main types:
The phrase “hot wallet” refers to any bitcoin wallet that requires the internet to function properly. Hot wallets derive their name from the fact that they need electricity to work. If the power goes out, then so does your hot wallet.
For example the popular mobile wallet BRD is an example of a hot wallet.BRD is a widely used mobile “hot” wallet
Not only do cold wallets work without an active internet connection, but many cold wallets don’t even need a computer. Cold wallets have several similarities to traditional physical wallets, but they also have a few differences.
For example, the Ledger Nano X and Nano S are the most popular cold wallets on the market.titans of the hardware wallet field
Is “Cold Storage” Different Than Using A Cold Wallet?
In general, “cold storage” refers to any bitcoin storage storage device that does not require an internet connection. A cold storage device can be a physical box, a piece of paper, a hardware wallet or a list of numbers and letters that you keep in your head.
“Hot storage,” are bitcoin storage devices that require an internet connection.
The Major Differences Between Cold Storage And Hot Storage
In contrast to hot storage, cold storage provides:
- Increased security protections
- A reliable way to keep your bitcoin offline
- An easy way to transport your bitcoin between your various wallets
What are the different types of bitcoin cold storage wallets?
When it comes to choosing a cold storage wallet that can help keep your bitcoin secure, the most popular choices tend to be:
Hardware wallets include USB sticks and other digital storage devices that you can use offline. Typically the private key to coins is never exposed to the internet because the device itself is air gapped.
Ledger Nano X
- RELEASED: 2019
- PRICE: $150
Ledger Nano S
- RELEASED: 2016
- PRICE: $59
- RELEASED: 2018
- PRICE: $320
- RELEASED: 2013
- PRICE: $119
The steel wallet is a piece of nearly indestructible stainless steel that you can use to carry your bitcoin private keys or backups in by etching or tiling them into the steel. This makes it an excellent choice if you’re concerned about losing paper or live in an area with lots of flooding, fires or earthquakes.
Steel wallets are interesting because they can act as both a “paper wallet” or as a backup for any kind of Bitcoin wallet in case yours is lost, stolen, or destroyed. Almost any crypto holder can benefit from one of these steel wallets regardless of how they choose to store their coins.