The CrystalTrade exchange works with more than 400 variations of cryptocurrencies: from the proven ancestor of crypto, Bitcoin, to meme coins. The question of token security is particularly relevant for many. There are two types of storage methods – hot and cold wallets.
Hot Wallet
A hot wallet is a cryptocurrency wallet that requires a constant connection to the network.
Cold Wallet
A cold wallet for cryptocurrency emerged because, although funds on the exchange have a high degree of protection, they are still not insured against intruders due to internal systеm issues or user carelessness. Sites are sometimes subject to hacking attacks, and some companies go bankrupt and disappear along with customers’ savings. A cold wallet solves this problem – only the owner has access to it.
Types of Cold Wallets
The main feature of such a storage tool is the ability to obtain a private key that works without an internet connection. This ensures protection from intruders, which is especially relevant when storing large amounts for a long period.
Paper Wallets
Paper wallets are essentially printed private and public keys. The private key should be kept safe as it is like a PIN code for a bank card, granting access to the coins. Plus: a paper carrier is easier to hide. Minus: paper is easily damaged.
Hardware Wallets
To create a cold wallet of this type, you need to download a separate program. The public and private keys are recorded on an electronic device, which connects to a computer to access the funds. Flash drives have a PIN code for additional protection, making the cold wallet less vulnerable to hacking. Minuses: such drives are quite expensive (200-300 dollars) and can be lost.
How to Create a Cold Wallet
Storing tokens on a separate flash drive ensures the security of your funds. How to create a cold wallet for cryptocurrency? Hardware or paper wallets can be purchased and connected independently.
Process of Creating a Cold Wallet
- Connect the hardware wallet to a laptop or personal computer.
- Log in using the keys for authorization.
- Perform all necessary transactions: wallet top-up, balance check, etc.
- Disconnect the cold wallet from the computer until its next use.
Pros and Cons of Cold Wallets
Before buying a cold wallet, you should be aware of the drawbacks of storing your virtual assets on it.
Advantages:
- Maximum security. All transactions: exchange, purchase, and withdrawal of funds are allowed only to their owner.
- Token safety in long-term storage conditions.
Disadvantages:
- Low transaction speed.
- Difficulty in use, especially for beginners.
- High cost of the device.
Other Ways to Store Cryptocurrency Cold
A cold wallet is not the only option for protecting savings from external interference. There are also these methods of storing tokens outside the exchange site:
USB
Before creating a cold wallet on a flash drive, you need to choose a reliable drive. It will contain all the information. The main thing is to ensure the flash drive is not damaged and is not susceptible to virus attacks.
Personal Computer
A convenient but not safe method – a PC is subject to hacking and virus attacks, as it has a constant network connection.
Recommendations for Choosing a Cold Wallet
The most common ones:
- KeepKey
- Ledger
- Trezor
Now you know how to create a cold wallet in addition to a hot one. Remember that even the largest companies with reliable protection cannot guarantee 100% security of your funds when placed on a site. And what is the point of owning crypto if formally it is accessible not only to you but also to the exchange? The principle of saving tokens in a Cold Wallet will allow you to become the sole owner of the coins, whose use will be unavailable to outsiders.