Bitcoin cold storage may seem similar to storing your bitcoin in a refrigerator, but the reality is considerably different. With cryptocurrency, hot and cold storages relate to the wallets that contain it. There are several techniques for storing your Bitcoin, so it might be difficult to determine which is the best and which is the worst, especially if you are new to the sector.
This tutorial will cover everything “cold storage Bitcoin”: how to keep Bitcoin offline, the best cold storage wallets, and a comparison of hot wallets versus cold wallets.
We’ll start slowly, though, to ensure that we’re both on the same page. Let’s go over the definitions first.
Understanding Bitcoin Cold Storage
Cold storage, in the cryptocurrency realm, refers to actual things in which you would store your bitcoins. They encrypt these gadgets with specific security codes to secure your cryptocurrency while being accessible at all times. We also know these devices as cold wallets, besides cold storage.
Hot storage (or hot wallets) refers to digital crypto-holding wallets you can access through the internet, your desktop, or anywhere in between.
There is a lot of debate regarding which wallet is the better, superior option. So, before we go into the Bitcoin cold storage tutorial, let’s try to answer this question.
Cold Storage vs. Hot Storage
The two ways of storing Bitcoin offline are still being debated. People compare and contrast hot wallets versus cold wallets in this argument to find the best option for keeping their cryptocurrency. We’ll discuss both hot and cold Bitcoin storage.
There are several points of view from which to begin this discussion. But there should only be one – security.
It makes no difference how much the wallet costs, how nice it appears, or how many options it offers if the storage technique is insecure. If you wake up one day and check your hot or cold wallet only to discover that they have hacked and stolen all of your cash, I believe the wallet’s aesthetic appeal will be the least of your concerns.
Keeping the above example in mind, my primary focus while discussing hot and cold storage (Bitcoin) will be security. If the storage mechanism looks to be superior in most respects but appears to lack suitable ways of fraud protection, we remove it from consideration.
Having stated that, I will give impartial information on both Bitcoin storage techniques, including their advantages and disadvantages.
The Benefits and Drawbacks of Bitcoin Hot Storage
It is probably safe to assume that hot storage is the most prevalent technique for storing cryptocurrency. There are several causes for this.
Foremost, hot storage is typically free. There are probably hundreds, if not thousands, of websites that give their wallets for free to anyone searching for hot storage techniques. This generates a lot of traffic, especially if the site advertises it well.
Another advantage of online and desktop wallets is that no matter what type of cryptocurrency you wish to keep, you’ll almost certainly find a wallet for it.
Even the least popular and well-known cryptocurrencies frequently have specific digital wallets in which to keep them. Mostly, the inventors or developers of these currencies offer optional, specially created wallets you may use.
This alone increases the number of hot storage users since many individuals keep cryptocurrencies other than Bitcoin or Ethereum.
Another appealing characteristic of digital wallets is their ease of accessibility. You may access your wallet with a couple of clicks if you’re on your desktop or laptop. This eliminates the need to constantly have a tangible thing on hand whenever you wish to conduct a transaction.
The Negatives
The biggest criticism leveled about hot wallets, however, is their lack of security. I showed before that this should be the priority for crypto storage, so let’s get right into it. Hot wallets links with the internet. While this isn’t a problem it might lead to one in the future. Potential hackers, thieves, and other nefarious persons are always seeking new ways to enter people’s wallets and take their cryptocurrency.
This has already affected many websites and firms that provide digital crypto storage and are constantly working to strengthen their security procedures. While this is admirable, it gives little to no sympathy to those who have previously dealt with fraudsters. If you keep your hot wallet up to date and receive security upgrades and other changes regularly, it reduces the likelihood of a security breach. Many of the most well-known and serious firms dealing with digital wallets attempt to do so.
Unfortunately, you can never be completely certain – all it takes is one flaw and all of your cryptocurrency profits and you lose money forever.
Another potential risk of storing your Bitcoin online is a technological failure.
Online wallets save your wallet key on their servers. That’s OK as long as the site is up and functioning. However, if a technical issue or malfunction occurs, you may lose your key for good.
Many websites even include disclaimers and require you to sign a contract that relieves the corporation from any liability if a similar catastrophe occurs.
The Benefits and Drawbacks of Bitcoin Cold Storage
If you’re wondering how to keep Bitcoin offline, cold storage is the way to go.
While not as popular or widely used as hot wallets, Bitcoin cold storage is rapidly growing and becoming more well-known. There are several valid explanations for this.
To begin with, Bitcoin cold storage is presently the safest option to keep your Bitcoins. You can hold the crypto coins in a compact gadget that you can carry around or stash in a strongbox, safe, or any other conceivable out-of-sight location.
These gadgets do not require an internet connection to work and function effectively, which removes most of the danger of theft, fraud, and so on. Aside from being safe, cold storage (Bitcoin) provides you with a sense of control that hot wallets just do not.
If you wanted, you could have the Bitcoin cold storage device in your pocket all day and have it practically by you at all times. You would be responsible for everything that happened to it, whether it was a transaction or storing it in a secure location.
Having this option ensures that you won’t lose your coins at any moment. You do not need to rely on any third-party service providers; the duty is entirely yours.
The Negatives
For the negative features of Bitcoin cold storage, the obvious one that comes to mind is the price.
Unlike hot wallets, Bitcoin cold storage may be rather expensive. However, it is subjective – if you have many Bitcoins; the price appears insignificant with the best security of your money. Alternatively, if you only have a modest quantity of bitcoin, cold wallets may appear to be overkill.
Bitcoin cold storage typically costs between $50 and $100. The $100 models are usually quite fancy and multifunctional, whereas the less expensive models are simply storage devices.
Another factor that deters consumers is the limited amount of Cryptocurrencies that cold wallets support.
At the time of writing, physical storage devices supported and could store just a few of the most popular cryptocurrencies in the market. Every day, new possibilities become accessible, but the process is much too sluggish to keep up with the ever-increasing quantity of cryptocurrency.
Best Cold Storage
I’ll teach you about the three most well-known and popular Bitcoin cold wallets on the market. Which of the following is the best cold storage wallet? So, I’ll leave it for you to decide.
Trezor
Trezor is well known among bitcoin enthusiasts. And rightly so: it was the first Bitcoin cold storage device available.
Many people believe Trezor to be the industry leader in safe and fully working cold wallets. It safeguards your bitcoin in all imaginable eventualities, such as physical durability or when you put it into a system infected with harmful viruses.
Overall, Trezor is an excellent choice for Bitcoin cold storage devices.
Ledger Nano S
This Bitcoin cold storage wallet is one of Trezor’s primary rivals. It provides excellent security at an affordable price.
We also know the Ledger Nano S for its compact size; it is smaller and more compatible than many other physical wallets on the market.
If you want something similar but less expensive than the Trezor, the Ledger is a wonderful option.
KeepKey
KeepKey is the least-known Bitcoin cold storage device on this list, but that’s because it’s still in its early stages.
This cryptocurrency wallet immediately rose to prominence because of its attractive and sophisticated design. Most of its specs are nearly comparable to those of the Trezor. What distinguishes them the most? The style.
KeepKey is significantly heavier than, say, a Trezor or a Nano Ledger S. This might or could not become a problem in the long term; it’s a case-by-case situation. Some individuals like bulkier wallets, while others prefer lighter wallets.
Conclusion
We’ve answered the most frequently asked questions about physical storage devices in this tutorial. We’ve discussed the best cold storage wallets, how to store Bitcoin offline, compared hot wallets versus cold wallets, and I’ve given you a few samples of some of the most noteworthy cold wallets on the market, such as Trezor and the Ledger Nano S.
The subject of Bitcoin cold storage is only a minor part of a larger discourse – as cryptocurrencies gain popularity, more and more individuals will look into the wallet solutions, resulting in even more of those options surfacing.
Security is an excellent rule of thumb to remember. Always prioritize the security of your cryptos and use both hot and cold wallets properly. The wallet’s appearance is irrelevant if it is untrustworthy.
Also read: CryptoKitties: Getting Your Own CryptoKitty
