Table of Contents
Introduction
Cryptocurrency is stored in wallets, whether hot or cold. There are many different ways to store your cryptocurrency, so it can be confusing to determine the safest method for storing your funds.
In this article, we’ll discuss all the cold storage methods: we’ll delve into how to store Bitcoin offline and learn what a Bitcoin cold wallet is. And, of course, let’s compare hot and cold wallets.
We’ll start gradually, beginning with definitions.
Hot Wallet and Cold Wallet
There are two ways to store cryptocurrencies, and they are the subject of constant debate. In this discussion, people compare hot wallets with cold wallets in hopes of finding the perfect way to store their cryptocurrencies. We’ll talk about both hot and cold storage of Bitcoin.
There are many aspects of comparison you could start this discussion with. Personally, I think a Bitcoin cold wallet should be secure.
It doesn’t matter how much a Bitcoin cold wallet costs, how good it looks, or how many options it has – everything becomes unimportant if this storage method is not secure. I don’t think you will care about the appearance of your wallet when you discover that your funds have been stolen from it.
Taking this example into account, I will pay particular attention to wallet security when considering Bitcoin storage. If a storage method appears to be more appropriate in most respects but lacks adequate fraud prevention measures, then the example is not worth considering.
That’s why I will present to you both the weaknesses and strengths of each method of storing cryptocurrencies.
Hot Storage – Advantages and Disadvantages
Pros
It’s safe to say that the hot storage method is actually the most popular way to store cryptocurrencies. There are several reasons for this.
- Most often free;
- Capable of storing almost any cryptocurrency;
- Easy to use;
- Available in a few clicks.
Another important factor is that it doesn’t matter what kind of cryptocurrency you want to store – you will probably find a wallet for it.
Even some of the least popular and well-known cryptocurrencies often have special wallets for storing them. Most of the time, the creators or developers of these currencies themselves have additional, specially designed wallets that you can use. This fact alone increases the popularity of hot wallets since many people can store more than just Bitcoin or Ethereum.
Another attractive feature of hot wallets is that they are always accessible. If you are working on your computer or laptop, you can access your wallet with a few clicks. This eliminates the need to always have a physical item with you when you want to complete a transaction.
Cons
However, the weak point of hot wallets is their security. I mentioned earlier that this should be a top priority when dealing with cryptocurrencies, so we’ll break down this criterion right away.
By default, hot wallets are connected to the Internet. Although this is not a problem in itself, it can lead to problems. Potential hackers and attackers are constantly looking for new methods to break into people’s wallets and steal their cryptocurrencies. Many websites and companies that offer software wallets have experienced this before and are constantly trying to improve their security measures.
If a hot wallet is up to date and continually integrates security updates and other improvements, it reduces the likelihood of a security breach. Many of the most well-known and serious digital wallet companies are trying to do this. Unfortunately, you can never be completely sure – all it takes is one mistake, and your entire savings could be gone forever.
If you store your Bitcoin online, another possible danger arises – technical problems.
Online wallets store your wallet key inside their servers. As long as the site is up and running, everything is fine. However, if something like a technical glitch or malfunction occurs, you could lose your key (and in turn, your cryptocurrency) forever. Many websites even offer a liability waiver and require you to sign a document that releases the company from any liability should this happen.
Let’s do a quick summary.
Hot wallet pros:
- Most often free;
- Capable of storing almost any cryptocurrency;
- Easy to use;
- Available in a few clicks.
Hot wallets cons:
- This may result in decreased performance, technical failures, etc;
- You don’t really feel like you’re in control of the keys – any technical problem could wipe out all your savings;
- Vulnerable to fraudsters and susceptible to hacker attacks.
Now that you have a better understanding of hot wallets, let’s move on to cold ones.
Bitcoin Cold Wallet – Advantages and Disadvantages
Pros
If you are looking for how to store Bitcoin offline, then a Bitcoin cold wallet is definitely the way to go.
Even though Bitcoin is not as popular and widely used, its popularity is constantly growing and it is becoming more famous. There are several good reasons for this.
- The safest way to store cryptocurrencies;
- Gives complete control of your funds;
- Typically small and compact, they are easy to hide or carry.
Firstly, Bitcoin cold storage is currently the safest way to store your savings. Cryptocurrency is stored in a small device and can be transferred to a safe, securely hidden anywhere. These devices require absolutely no internet connection to operate and function properly – this factor alone eliminates much of the potential risk of theft, fraud, and so on.
In addition to being truly secure, a Bitcoin cold wallet offers you complete control over your funds that hot wallets simply don’t have.
If you want, you can carry the device in your pocket and keep it close to you at all times. You will be responsible for everything that happens to it, be it transaction or storage.
All this allows you not to worry that your funds will be stolen without your method. You don’t need to trust third parties – the responsibility falls on your shoulders.
Cons
When considering the negative aspects of Bitcoin cold storage, the first thing that comes to mind is the price.
Unlike hot wallets, cold storage can be quite expensive. Although this is subjective – if you have a lot of Bitcoins, then the price seems negligible if we are talking about the best protection for your savings. But if your savings are very small, a Bitcoin wallet may become an expensive proposition for you.
A Bitcoin cold wallet costs between $50 and $100. The $100 options are usually quite sophisticated and feature-rich, while the cheaper versions are simply storage devices.
Another thing that puts people off is the small number of cryptocurrencies that support cold wallets.
As of this writing, devices only support some of the major cryptocurrencies. New options are becoming available every day, but the process is too slow to catch up with the ever-growing number of cryptocurrencies.
Brief summary:
Cold Bitcoin wallet pros:
- The safest way to store cryptocurrencies;
- Gives complete control of your funds;
- Typically small and compact, they are easy to hide or carry.
Cold Bitcoin wallet cons:
- May be expensive;
- Not as practical or easily accessible as hot wallets.
Now that you know how to store Bitcoin offline, let’s try to find the best Bitcoin wallet for cold storage.
Best Bitcoin wallet
Let me introduce you to the three most popular Bitcoin wallets on the market. You can decide which one is the best Bitcoin wallet for yourself.
Trezor
Trezor is very well known in the cryptocurrency community. And it’s not just that – it was the first Bitcoin storage device.
Today, Trezor is considered by many to be the leader in cryptocurrency storage. It protects cryptocurrency both physically and at the software level.
Overall, Trezor is a great choice.
Nano Ledger S
This is the main competitor to Trezor. It offers greater security at a competitively low price.
The Nano Ledger S is also known for its size – it’s smaller and more compatible than many other physical wallets.
If you’re looking for something similar but cheaper than Trezor, Ledger is a great alternative.
KeepKey
KeepKey is a lesser-known cryptocurrency storage device on this list, but that’s because it’s still relatively new.
This cryptocurrency wallet quickly became famous for its elegant and sophisticated design. Most of its characteristics are almost identical to those of Trezor. The main thing that distinguishes them? Design.
The KeepKey is a bit heavier than, for example, the Trezor or Nano Ledger S. Some people like the heavier versions of wallets, while others prefer them to be really lightweight.
Conclusion
In this guide, we’ve covered the most common questions regarding physical devices for storing cryptocurrencies. We talked about cold storage wallets, discussed how to store Bitcoin offline, compared hot and cold wallets, and I gave you some examples of some of the more well-known wallets.
The topic of Bitcoin cold storage is just a small part of a larger overview – with the rise in popularity of cryptocurrencies, more and more people will be looking for affordable wallet options, which in turn will lead to even more of these options becoming available.
A good rule of thumb to remember is safety. Always prioritize the security of your wallets, and always choose both hot and cold wallets based on security. The aesthetics of a wallet don’t matter much when it’s unsafe and unreliable.
