You must have heard people saying that they keep their bitcoins in cold storage !!
But have you wondered what this cold storage is?
I believe you haven’t and that’s the reason you are here to inquire about it.
Cold storage is a widespread practice generally.
We tend to save those things in cold storage that we want to preserve for the long term, just as we sometimes do food or medicines in a cold environment.
Similarly, in the cryptosphere, most of the investors like you and me want to preserve their cryptocurrencies for the long term.
And that’s where the concept of cold storage comes in crypto, but this cold storage is different from the cold storage of food or medicines.
That’s why don’t worry as I am not going to tell you to put your cryptos in a freezer, but as always at TheMoneyMongers I will share what cold storage means for cryptocurrencies and how you can also do it?
So let’s begin:
What Is Bitcoin or Cryptocurrency Cold Storage?
In the cryptocurrency realm, cold storage doesn’t mean to freeze your cryptocurrencies or bitcoins.
As you all know in cryptosphere, you own your coins only when you hold their private keys. If you don’t know this necessary thing, I recommend you to stop right here and read our guide on Bitcoin private key.
And those who understand the importance of private keys, keep their keys offline away from the internet and malicious participants. And this approach of storing your bitcoins/private keys is known as cold storage in the context of cryptocurrencies.
Cold storage is undoubtedly the best way to store your cryptocurrencies safely and thanks to the maturing space of cryptocurrency now we have ample options for cold storing cryptocurrencies.
That’s why it is much easier to avoid exchange hacks and mobile hacks by simply adopting the best practices of cryptocurrency cold storage:
Best Cold Storage Options
There are quite a few reliable methods of cold storage for cryptocurrencies:
#1. Crypto Cold Storage USB
One easy cold storage option for cryptocurrencies is to use USB.
USB devices can be used to import private keys of cryptocurrencies, and they can be kept for a long time in an offline environment.
This choice comes with its trade-offs because anyone in possession of the USB can easily take your cryptocurrencies and moreover these USBs can be destroyed easily.
Hardware malfunction is another threat that you need to keep in mind before you choose USBs as a cold storage option for your cryptocurrencies
#2. Physical Coins Like Casascius Bitcoins
Physical coins is another cool way of cold storing your cryptocurrencies. Bitcoin physical coins are called Casascius Bitcoins, and the “private key” is on a card embedded inside the coin and is protected by a tamper-evident hologram.
The hologram leaves behind a honeycomb pattern if it is peeled. If the hologram is intact, the bitcoin is good. If you have purchased a 2-factor item, the private key is encrypted and will need to be decrypted using your original preselected passphrase before you can redeem the funds.
#3. Offline Hardware Wallets
Hardware wallet is the easiest and the most hassle-free way of storing cryptocurrencies offline.
As we speak hardware wallets supports more than 1000 coins and tokens on their devices which is a huge opportunity to safeguard your cryptocurrencies in cold storage.
For those, of you who don’t know about hardware wallets, they are small USB like device with a minimal digital interface capable of storing private keys of different cryptocurrencies.
But this ease and security come with a price but I think spending approx $100 should not be a problem for anyone who is serious about his/her cryptocurrencies which can be worth millions someday.
That’s here are some of the best-recommended hardware wallets for cold storage:
- Ledger Nano S (I use this)
#4. Paper Wallets
Want something cheap?
Well, paper wallets are for you if you are looking for something free of cost to cold store your cryptocurrencies. But my recommendation would be to avoid using paper wallets.
Paper wallets are not for everyone as it requires superior crypto literacy to be used successfully. Moreover, it is hard to track the currencies stored on a paper wallet in real time.
But if you are someone who is confident of using paper wallets, then you can use different paper wallet clients to generate paper wallets for various cryptocurrencies.
For example, here we have used MyEtherWallet to generate Ethereum paper wallet for you !!
Lastly, in the age of hardware wallets, I think paper wallets are not required because paper wallets are less secure on the other hand hardware wallets are safe as well as handy.
#5. Cold Storage Laptop/Desktop
If you are holding thousands of dollars in cryptocurrencies, it could be worth purchasing a cheap laptop or desktop to store cryptocurrencies offline.
Using this laptop or desktop you can host a desktop wallet like Armory in a totally offline environment and can keep track of this wallet online through a ”watch-only” set-up.
This way you will keep your coins/bitcoins on a device that you never bring online and hence will be keeping the private keys in an offline environment.
Check out this video to learn, how you can create offline cold storage on a laptop or desktop using Armory wallet for Bitcoin:
Conclusion: How To store Cryptocurrency Offline?
So these are some of the popular ways through which you can create offline storage for your cryptocurrencies like Bitcoin.
But out of these methods, I would recommend only hardware wallets and cold storage using laptop/desktops because other ways are not that reliable.
On the other hand, some people are extra smart who keep their seed or private keys in two or more places by cutting it in different parts.
This is a highly risky practice that can result in a total loss of your funds in case you are not able to resemble any of the cut pieces.
So please ignore this method too, and the same thing Trace Mayer has also reiterated in his tweet:
With #Bitcoin there is luke-cold storage like @LedgerHQ & @TREZOR and *extreme* cold storage like @bitcoincoreorg + @armory + @GlacierProtocol + @Puri_sm. Do not 'cut up a seed' like the Winklevii. Amateurs. Respect the private keys or get #REKT. ❄️ https://t.co/L49ZQF7Zx5 pic.twitter.com/YViBfE2OM6
— Trace Mayer (@TraceMayer) December 28, 2017
So that’s all from us today, and now you share with us: Which cold storage option did you like? Are you using any of these cold storage options for your cryptocurrencies? Do tell us in the comments section below 🙂
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Hey there! I am Sudhir Khatwani, an IT bank professional turned into a cryptocurrency and blockchain proponent from Pune, India. Cryptocurrencies and blockchain will change human life in inconceivable ways and I am here to empower people to understand this new ecosystem so that they can use it for their benefit. You will find me reading about cryptonomics and eating if I am not doing anything else.