Recently, many people can’t help but be bewildered by hacker attacks on the crypto market. After only 1 night, their wallet account “flew without wings”. And many people accept to spend some money using cold wallets because of their safety and high security. So what is a cold wallet? Let’s learn about this content with CoinCu.
What is a cold wallet?
Simply put, cold wallets are crypto wallets that use keys generated by a source that is not connected to the blockchain and the internet. It only connects to the internet when you need to make a transaction. Separating money from the internet is the most reliable way for users to protect their funds from hacker attacks and scams.
Cold wallets store your private keys, which are the things that give you access to your electronic gadgets.
Cold wallet classification
This is the most commonly used wallet. Hardware wallets are physical means, often similar to a USB stick, for securely storing a user’s private key. They do not require a connection to the internet, so they are not affected by viruses or malware that may be on the computer.
In addition, hardware wallets also allow you to set an additional PIN or password for safety, if the case is lost, it will not be able to be used by a third party.
Paper wallets are the safest way to protect your cryptocurrency from computer attacks. A paper wallet is simply a piece of paper printed with a public address, private key, and QR code to facilitate transactions. Only when you own this piece of paper will you be able to access the cryptocurrency in the addresses printed on the paper.
However, paper wallets are also easily damaged, degraded, or lost at the printing shop. So many people have pressed these paper wallets and stored them in their home safes, or even deposited them in safes at banks.
Offline software wallet
Compared to hardware wallets and paper wallets, offline software wallets are much less popular. You can understand offline software wallets similar to software wallets (belonging to hot wallets). However, this software is built to be installed on devices that are not connected to the Internet (eg mobile phones, laptops).
Features of cold wallets
- Cold wallets are not connected to the blockchain and the internet, so they are highly protective and secure against malware.
- Allows you to safely and efficiently store large amounts of cryptocurrencies.
- Cold wallets don’t need third parties to handle keys and cryptocurrencies like online wallets.
- Limited means of communication maximize security.
- Cold wallets allow you to add an extra layer of security through a PIN configuration of your choice, which helps prevent third parties from using the device.
- Compatible with most available operating systems.
- The keys are generated and maintained in the same device that the wallet uses, so they are guaranteed to be safe and secure.
- Paper wallets are not affected by device failures like other cold wallets, typically hardware wallets.
- Cold wallets have the ability to generate seeds that allow you to recover keys and withdraw funds.
Advantages and disadvantages of cold wallets
Despite applying modern technologies and being considered the safest place to protect users’ cryptocurrencies, besides outstanding advantages, cold wallets are also not immune to some shortcomings.
High security and safety: Cold wallet stores the user’s address and private key in offline mode, completely separate from the Internet, so it is not affected by malicious computer software, viruses, or hackers’ intrusion.
Stability and mobility: When using a cold wallet, you do not have to worry about conditions such as system failure, slow network lag, or faulty software such as hot wallets or online e-wallets. In addition, with a compact design like a USB stick or a piece of paper, you can completely put it in your bag and carry it everywhere.
No need to verify identity when using: Another valuable point of cold wallets is that you do not need to perform identity verification procedures when using while hot wallets are required.
In particular, hardware wallets also have parallel software included that makes it easy for users to view investment portfolios without risking their private keys.
The inconvenience of transactions: Before making transactions, cold wallets need to be connected to the internet. If you forget to bring your wallet, the transaction will not be possible.
The price is quite high: Currently, to own a hardware wallet, you need to spend from $50 to $200. Besides, if you want to use the software wallet offline, it will cost extra to buy a new phone or computer to perform the task of storing cryptocurrency.
Slow transaction processing speed: When using a hardware wallet, you need more time to transact because you have to perform many different operations.
Easily lost or damaged: Hard wallets are easily broken or damaged, while paper wallets are easily torn when subjected to strong physical impacts. Besides, despite their compact design, both wallets are easy to lose if not stored carefully. This may cause you to lose your stored assets.
Limited storage capacity: hardware wallets are not yet capable of storing multiple cryptocurrencies at the same time. Compared to hot wallets, it is quite limited.
Compare hot wallets and cold wallets
|Hot wallet||Cold wallet|
|Security||Low security, vulnerable to viruses, hackers||High security, immune to hackers, viruses, and malware|
|Transaction speed||Fast transaction speed, just need to have the internet to make transactions immediately||Low transaction speed, many operations must be performed before the transaction|
|Supported coins||Supported many coins||Only some coins are supported|
|Number of coins supported||Unlimited||Limited|
|Using||Since the hot wallet is connected to the Internet, it is easy to make transactions seamlessly with just a few buttons on your phone or computer.||With hardware wallets: to store cryptocurrency, you need to send money from the hot wallet to the public address of the hardware wallet. If you want to send cryptocurrency from a hardware wallet to an exchange or to a friend, you need to connect the wallet to the internet via specialized software and sign the transaction with the private key.|
With a paper wallet: to send money from a paper wallet, you need to log in to the hot wallet by scanning a QR code to be able to use the money in the wallet
|Price||Free||At least $50-$200|
|Property verification||ID card, passport,…||No account verification required|
Choosing a hot wallet or a cold wallet to use depends on your purposes and needs. If you are a trader, often buying and selling cryptocurrencies, hot wallets will bring a lot of conveniences. If you want to add cryptocurrencies to your long-term portfolio, cold wallets are a safe place to put your assets. Hopefully, the information that CoinCu brings to you has helped you better understand crypto cold wallets.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
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