A cold wallet, also known as a ‘cold wallet’, is a physical device that stores the private keys to your cryptocurrency offline. Essentially, the temptations and vulnerabilities to cyber attacks are eliminated, making cold wallets some of the safest options for storing digital assets.
These devices often resemble a USB stick and are designed to offer the perfect combination of security and simplicity. If you value security, a cold wallet is the answer.
Why do you need a cold wallet?
Cryptocurrency security is a priority for any serious investor. Here are some reasons why you should opt for a cold wallet:
- Maximum protection: Because it works offline, a cold wallet becomes impenetrable to hackers.
- Total control: Your private keys remain in your hands, not stored on third-party servers.
- Loss Prevention: Unlike online platforms that are vulnerable, cold wallets drastically reduce the risk of cryptocurrency loss in the event of an attack.
- Long-term compatibility: By using a cold wallet for storage, you protect your cryptocurrency for the future, regardless of market fluctuations or online platform problems.
How does a cold wallet work?
In simple terms, here’s how a cold wallet works:
- Offline Storage: Private keys are saved on the physical device (the cold wallet).
- Offline Signing: Even if you need to send cryptocurrency, the transaction is signed on the offline device.
- Online Transfer: After signing, the transaction can be securely transmitted on the blockchain using a computer connected to the internet.
Everything is done quickly without exposing the private keys to the online environment.
How do you choose the right cold wallet?
There are several types of cold wallets on the market, each with its own set of features. Here’s what you should look for in a cold wallet:
- Reputation: Choose established brands like Ledger and Trezor, which are known for their security standards.
- Compatibility: Check if the wallet supports the cryptocurrencies you hold (Bitcoin, Ethereum, Litecoin, etc.).
- Intuitive interface: Choose a device that’s easy to use, even for the non-tech-savvy.
- Cost: Cold wallets can range between £300 and £1,500. Invest in a device that gives you a balance between price and functionality.
How do you get started with a cold wallet?
Setting up a cold wallet is simpler than you might think. Here are the essential steps:
- Buy the wallet: Choose a wallet from official websites or authorized resellers to avoid compromised devices.
- Configure the device: Follow the manufacturer’s instructions to set a PIN and generate private keys.
- Write the backup seed: Write down the recovery phrase (seed) on paper, not on your phone or computer. Keep it in a safe place.
- Transfer funds: Send cryptocurrency from your hot wallet to your cold wallet. Do you have a favorite cryptocurrency that you track in terms of price and trends? You can find an up-to-date price by visiting our dedicated cryptocurrency price list page.
- Store your wallet safely: Keep your cold wallet in a dry and secure place away from unauthorized access.
Important precautions
- Do not share your PIN or recovery seed with anyone.
- Do not buy second-hand cold wallets. There is a risk that the device has been compromised.
- Update your cold wallet’s firmware regularly, but only from the official website.
A cold wallet offers the most secure way to store cryptocurrencies in the long term. If you care about the security of your investments and want to sleep easy knowing your coins are safe, this solution is the answer. To understand exactly how it works and why it’s essential for your portfolio, we invite you to read our detailed article: Cryptocurrency wallet: Ledger, the perfect solution for investors.