Many people, after the first purchase of Bitcoin and other cryptocurrencies, are wondering where it is best to store them, but why is it important to store cryptocurrencies securely at all?
Since the invention of the Bitcoin network, many people have accidentally lost Bitcoins due to failed backups, misspelled letters, lost hard drives, damaged SSDs or many other mistakes. In addition, there are the increasingly frequent attacks by hackers.
It is therefore important for completely different reasons to store the purchased cryptocurrencies correctly and securely. One of the most popular and safest methods is the cold storage variant, but is it also the only safe variant?
What does cold storage mean?
Cold storage is basically a system or module designed for the secure storage of important and inactive data. In addition to being used by companies that want to store sensitive data securely, cold storage systems are also used by private individuals to store their purchased cryptocurrencies.
The Benefits of Cold Storage
High-performance primary storage is generally considered to be too expensive for idle data to be stored long-term or indefinitely. On the other hand, cold storage variants can be linked to low costs, high capacities and durability of the data.
A small disadvantage is that data recovery and response time can be significantly slower with a cold storage system than with devices or systems designed for live data. However, when storing Bitcoin and other cryptocurrencies, the loading speed is usually secondary.
Cold Storage Wallet – Are there any restrictions with the brokers?
Cold storage systems are known as offline wallets, which can basically be used in conjunction with all cryptocurrencies and brokers. If a broker restricts the storage options of the acquired cryptocurrencies, the broker should be examined more closely.
People who are unsure about choosing a suitable broker will find Nachgefragt.net Experience reports on various online brokers and on trading with cryptocurrencies.
What types of cold storage are there?
Currently, there are several ways to “freeze” assets such as Bitcoins and other cryptocurrencies. The most popular cold storage systems include the “Paper Wallet” and the hardware solutions.
The Paper Wallet variant
In principle, cold storage storage made of “paper” is nothing more than a piece of paper on which the private key is stored. Even if it sounds far from “virtual reality”, they are a viable basic option, since this form has an excellent level of security.
If cold storage users put their private key on an offline computer, the probability of intrusion by a hacker or losing the key is extremely reduced.
A feature of this wallet is that a QR code is embedded so that the owner can easily scan it during a transaction. The wallet can then be reactivated. In the growing and enthusiastic market for blockchain, there are various crypto wallet generators.
It is only necessary to check whether the selected source is reliable and suitable for providing a secure service. In addition, the Cold Storage Paper variant should fit the user and his needs.
The hardware variants
The easiest way to store the private key in a virtual wallet is to store it on a removable disk or USB drive, protected from dangerous hackers, as this will prevent them from stealing the coins.
It’s actually quite simple, the private key is saved as a file and then stored on a hard disk or a USB flash drive. The private key can be used when the data carrier is connected to the network.
Another form of storage is hardware wallet or disks created and formatted exclusively for this mission. They look like a USB stick in appearance, but they integrate a display.
Is the cold storage storage of cryptocurrencies now safe?
Cold storage systems are very secure, both in paper mode and the hardware solutions offer secure storage variants for the private keys. But beware, anyone who loses the private key to their cryptocurrencies can no longer access it. Which means, the cryptocurrencies are completely lost.
The correct storage of private keys is extremely important in this type of storage. Many bitcoins have already been lost because the private keys were not stored correctly. In addition, these private keys can be destroyed if they are stored, for example, on paper.
Cold storage, isn’t it?
In principle, cold storage can be considered one of the safest forms of storage for Bitcoin and Co, but how cryptocurrencies or the keys to them have been best stored depends on various factors.
Of course, people who want to trade cryptocurrencies on a daily basis need different forms of storage than people who want to keep the acquired cryptocurrencies for the next few years.
It is therefore advisable to compare the different variants based on their characteristics, their popularity and their capabilities and then select a suitable variant. People who do not want to do a big trade with the cryptocurrencies are most likely best advised with the cold storage variants.