Cold Storage: An Important Element of
Cryptocurrency’s meteoric rise on the platform of blockchain development in value is making cold storage wallets a hot commodity. The higher its value goes, the more emphasis cryptocurrency users will place on security. Many cold storage devices are entering the market offering an increasing number of options for users. By taking advantage of cold storage options such as paper wallets and hardware wallets, crypto enthusiasts can store coins in a safer and more secure way. Currently, only a handful of well-known hardware companies offer cryptocurrency storage devices such as Keepkey, Ledger, Opendime, and Trezor but it is changing rapidly.
How does cold storage work?
Cold storage means keeping all one’s private-key data for assets on an offline computer or device. This means they cannot be accessed online or on a network. They are therefore much more secure from hacking, theft or network failures. Unless someone has access to your password and device, anyone wanting to steal another person’s cryptocurrencies would have to break through complex encryption systems in person. There is simply no safer or easier way to manage large amounts of cryptocurrencies.
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Kinds of cold storage
- A USB drive or other data storage medium such as an external hard drive
- A paper wallet (a piece of paper containing your key and personal address)
- On an offline hardware wallet (a storage device that you can connect into a computer to sync for transactions)
- A traditional crypto wallet that does not have internet access (i.e. a wallet on a phone set to airplane mode)
What Risks Exist with Cold Storage?
While cold storage is the safest way to store cryptocurrencies, there are still some risks. Different from traditional wallet employed blockchain development, USB devices may be damaged; paper wallets may be burned, lost, or made physically illegible; cryptocurrencies kept on an offline computer are still at risk for viruses, malfunctioning hardware or theft. When transferring cryptocurrencies to a cold storage device, it is still potentially possible for someone to access your original, traditional crypto wallet and recover a deleted wallet to access your funds. It is therefore very important that you protect your cold storage devices and understand there is no way to 100% securely digital assets.
Cold Storage Limitations
While cold storage is the safest way to protect your assets, there remain some things they cannot do compared to traditional cryptowallets. For example, because they are offline, you cannot trade assets to other wallets or exchange currencies for one another with speed or ease. As cryptocurrencies are increasingly used for physical purchases, traditional wallets will be increasingly necessary.
Secure Traditional Wallets
Just because traditional wallets are not as secure as cold storage wallets, it does not mean they are not safe. Thanks to blockchain development, Wallets such as Infinito Wallet, the wallet created by Infinity Blockchain Labs, for example have numerous features that allow users to be confident their funds are secure. In addition to the inherent safety of the blockchain’s immutable decentralized ledger, before sending a password-protected transaction, users must unlock the app with fingerprint technology. And automated backups ensure that one’s data is always up-to-date.
Because traditional wallets and cold storage both have advantages and disadvantages, neither should be seen as a replacement for the other. Instead, responsible asset storage and use should involve both depending on your individual needs and activities. Doing so will allow users to take full advantage of cryptocurrencies while remaining confident that their hard-earned assets are safe.