What is a cold crypto wallet?
One of the important aspects of investing in cryptocurrency is asset security. Using cold storage wallets is the safest option.
What is a cold storage crypto wallet?
A cold storage crypto wallet is a software or hardware development for storing digital assets. A cold wallet differs from the rest in that it is designed to be used offline (even without the need for a network). This provides several security benefits and protects the investor from digital attacks.
But, as a rule, cold storage wallets are less convenient to use than regular ones connected to the Internet. This is due to the fact that the investor must go through additional steps (complex passwords, entry codes) to gain access to their funds. Such a complex wallet protection system is extremely useful for security! If you need easy access to your assets at any time, cold wallets are not your option.
Cold storage wallets come in a variety of forms—software, hardware, and paper.
How do cold crypto wallets work?
Regular crypto wallets and cold wallets work in a very similar way. They are designed to fulfill the same role. But cold provides better protection against digital threats.
Each wallet has an address similar to a bank account number, allowing the user to receive and store crypto assets. When sending cryptocurrency, the recipient will be able to see the address of the wallet from which the transfer was made. Another important part of any crypto wallet is the public and private keys. The former is secure to send to anyone and is an encrypted version of the wallet address. For most investors, this is not important, but it is better to be safe.
The private keys act as a recovery code for the wallet. Therefore, they should never, under any circumstances, be sent to anyone. Private keys are presented as a phrase of 12-24 words.
Benefits of cold storage wallets
The main advantage of cold storage crypto wallets is security. Any wallet connected to the Internet can be hacked.
To steal funds from a cold wallet, you need a physical device. However, even in this case, the attacker will need a pin code to gain access to the device. For example, the Ledger Nano X cold wallet locks the device if the wrong PIN is entered many times.
In view of the global situation, sanctions may be imposed on Russian users at any time. And blocking wallets that do not work without an Internet connection cannot be avoided. Cold wallets in this case will be a great option, because they work offline, they cannot be blocked!
