Cold storage is a very common thing.
We cold store things which we want to preserve for a long time.
In the cryptocurrency space, investors who want to preserve their digital assets for a long-term investment use this cold storage concept.
However, this cold storage is different from other types because the crypto ecosystem is quite new and a little tricky to understand.
But here at CoinSutra, we strive to share the best practices of this industry in a non-technical way.
And in this post, we have brought up the topic of cold storage in cryptocurrencies so that you can keep your crypto coins safe.
So let’s begin.
What is Cold Storage in Cryptocurrency (aka Cold Wallets)
Some of you might know that if you hold your private keys, then only you own your crypto coins. If you don’t own your key, then you don’t “own” your coins. (See our post on Bitcoin Private Keys.)
And many of you might be just starting off with cryptocurrencies, so here’s a word of advice:
- It’s important to store your digital assets such as BTC, ETH, or LTC away from exchanges and hosted wallets. If you are not doing this, you are at risk of losing all of your coins in an instant.
Exchanges and third-party wallets hold your private keys on your behalf. This is a big risk because if something goes wrong with their servers, or if they decide to shut down, then your coins are gone forever.
So don’t store your coins for more than 1-2 days with any hosted or third-party service.
Which brings us to the million dollar question:
- Where should you keep your cryptocurrencies?
- Which wallets/methods are the most reliable?
That’s where the need for cold storage comes in.
Cold storage (aka cold wallets) means generating and storing the crypto coin’s private keys in an offline environment, away from the internet.
The online environment is very vulnerable to hacking, as we keep seeing how ransomware extorts many people around the world. Also, we can never forget the Mt.Gox incident.
So to avoid such situations, it is essential that you keep your coins safe in an offline manner.
Luckily, the cryptocurrency space has matured a bit, and there are enough cold storage options available.
Best Cold Storage Options for Cryptocurrencies
Some of the most popular cold storage options are:
1. Cryptocurrency Hardware Wallets (safest)
Hardware wallets are the most robust cold storage option for cryptocurrencies. However, this robustness comes with a price tag.
A hardware wallet is an electronic device. It signs transactions through the private keys which are stored offline. It also allows you to recover your funds using a backup seed key if the device is damaged or lost.
There are 4 popular hardware wallets available in the market:
- Ledger Nano X (I use this)
- Ledger Nano S (Cheaper version of above: Without Bluetooth)
If you want to securely store Bitcoin & other cryptocurrencies in the long term, then you should definitely order a hardware wallet.
Since most of these hardware wallets have a waiting period of a month or two due to huge demand, you should order one as soon as possible.
If you are looking for a single recommendation as the best Bitcoin hardware wallet, then you should look no further than the Ledger Nano X.
At the time of writing this article, there has been no reported theft or loss from using hardware wallets.
2. Paper Wallets
A paper wallet is the cheapest form of cold wallets available.
It is free to use and contains a pair of private/public keys printed on a piece of paper.
In this method of storing, your private keys are generated offline so you need not worry about security. And once you transfer the coins to paper wallet’s public address, you are safe.
For different cryptocurrencies, there are different paper wallet clients available. You can make any number of paper wallets whenever required using these clients.
3. Storing Cryptocurrency in USB Drive (Not so safe)
Using a USB drive as a cold wallet is one of the easiest ways to cold store your coins.
With this, you can export and save your private keys on the USB drive.
But this choice comes with its trade-offs, as anyone with access to your USB has access to your crypto coins. More over, hardware failures are common with USB.
4. Desktop Wallets
Desktop wallets are clients that only exist on your computer.
They can be used to export files of encrypted private keys in an offline environment.
In these pieces of software, the private keys are stored offline on your machine. But while receiving or sending funds through them, you are online.
Pros and Cons of Cold Storage Options
Though all types of cold wallets keep private keys offline, they all have their own pros and cons.
List of cold storage Wallet for different cryptocurrencies
There are hundreds of cryptocurrencies in the market right now. While some of them have more than one cold wallet option, some do not have any at all.
I will be updating this list with the latest options, so keep checking back here for updates.
|#||Name||Cold Wallet Options|
|Hardware Wallets||Paper Wallets||Desktop Offline Wallets|
|1||Bitcoin||Ledger Nano S, Trezor & KeepKey||Bitaddress||Electrum, Armory|
|2||Ethereum||Ledger Nano S, Trezor & KeepKey||MyEtherWallet||NA|
|3||Ripple||Ledger Nano S||RipplePaperWallet||NA|
|4||Litecoin||Ledger Nano S, Trezor & KeepKey||Liteaddress||NA|
|5||Ethereum Classic||Ledger Nano S, Trezor||ClassicEtherWallet||NA|
|6||Komodo||Ledger Nano S||NA||NA|
|7||Dash||Ledger Nano S, Trezor & KeepKey||DashPaperWallet||NA|
|8||Dogecoin||Ledger Nano S, Trezor & KeepKey||DogePaperWallet||NA|
|11||Stratis||Ledger Nano S||NA||NA|
|12||Zcash||Ledger Nano S, Trezor||NA||NA|
|15||Golem||Ledger Nano S, Trezor||MyEtherWallet||NA|
Do share with us in the comments which cold wallet you are using for your crypto coins. Have a question regarding Cold storage or keeping your Cryptocurrencies secure? Feel free to ask me in the comment section below.
And if you find this post useful, do share it with your friends on Facebook & Twitter!
Here are hand-picked articles you should read next:
- The 3 Best Hardware Wallets For Bitcoin of 2020 ( + Altcoins Supported)
- 10 Best Ethereum [ETH] Wallets To Use In 2020
- Best Bitcoin Wallets
Harsh Agrawal is the Crypto exchanges and bots experts for CoinSutra. He founded CoinSutra in 2016, and one of the industry’s most regarded professional blogger in fintech space.
An award-winning blogger with a track record of 10+ years. He has a background in both finance and technology and holds professional qualifications in Information technology.
An international speaker and author who loves blockchain and crypto world.
After discovering about decentralized finance and with his background of Information technology, he made his mission to help others learn and get started with it via CoinSutra.
Join us via email and social channels to get the latest updates straight to your inbox.