Keep Your Crypto Safe Using Cold Storage Devices
Although cryptocurrency wallets are generally safe and hard to tamper with, hackers can still find a way to gain access to them so long as they’re connected to the internet.
With a normal savings account, your money is protected up to a certain amount in case it falls victim to fraudulent activities. Lost or stolen money can be recovered if it’s covered by insurance.
However, in cryptocurrency, once your digital wallet gets compromised or your coins get stolen, there’s no recovery from it. The value is lost forever, and you can’t ask anyone for help because the system is unregulated and decentralized.
To protect your account from such situations, you can add an extra layer of security to your digital wallet through a cold storage device.
What is Cold Storage?
Cold storage is a term used to refer to an offline wallet designed for securing bitcoins and other cryptocurrencies. The concept behind this is to store your digital wallet on a device disconnected from the internet, protecting its contents from unauthorized access, cyberattacks, and other vulnerabilities of being online.
Crypto wallets usually have public and private keys. When your private key gets stolen, you’ll lose control over your account as it can be accessed without authorization.
Cold storage devices address security issues by confirming transactions offline.
Transactions initiated online are temporarily transferred to an offline wallet stored on a portable external device such as a flash drive or CD. A hard drive, offline computer, or even physical paper can also be used as a cold storage device.
With cold storage, the transaction is digitally signed using the device before it’s transmitted back to the online network. Since the private keys have no direct contact with the online network even during the signing process, it’s virtually impossible for a hacker to access it.
In exchange for extra security is the cumbersome process of transferring data to and from the cold storage device.
Types of Cold Storage
Here are the most common types of crypto cold storage used today:
- Paper wallet
This is the simplest type of cold storage. It involves printing a hardcopy of both the private and public keys. A paper wallet usually comes with a QR code that can be scanned for quicker transaction confirmation.
The downside to this is that if you lose your paper wallet, you won’t be able to access your digital wallet. It’s best to make several copies of this and store them in safe locations as a backup.
- Hardware wallet
Hard drives and flash drives are the best examples under this category. They’re the preferred choice to secure digital wallets offline due to their convenience and portability.
- Sound wallet
This is an uncommon method of storing crypto private keys. It basically stores the private keys in encrypted sound files that can be written on vinyl discs or CDs. The code hidden in the audio files can be decrypted through a spectroscope application.
- Deep cold storage
The method involves storing the private keys in secured bank vaults. The service is usually covered by insurance, giving you extra protection against theft or loss of coins.
The biggest drawback to this method is how it defeats anonymousness. Since the bank will require your identity and address, you won’t be able to disassociate yourself as the owner of the digital wallet.
Cold storage is an excellent choice for securing your digital wallet. The added layer of protection is worth the troublesome process of transferring information to and from the cold storage device. Make sure to choose one of the methods available suited to your security preference and access convenience.