An important part of owning cryptocurrency is having a secure place to store it. Crypto is a favorite target for scammers and thieves, and if you don’t protect yours, you could lose it.
There are two types of crypto wallets you may use with this: Hot wallets and cold wallets.
The main difference is that hot wallets hook up to the internet, whereas cold wallets stay offline. This makes hot wallets far more convenient to use, but not as secure. There’s less threat of a cold wallet being hacked compared to a hot wallet.
Another difference is the price. Most hot wallets are absolve to use. Cold wallets typically cost anywhere from $50 to $150. Because of that, crypto investors often wonder at what point the security of a cold wallet helps it be worth the high cost. First, let’s check out exactly what makes a cold wallet your best option.
Why a cold wallet is the best crypto storage
When you buy crypto, you have a few different storage options:
Keep it wherever you bought it. Some of the best cryptocurrency exchanges keep coins in their own cold storage for security. However, this still isn’t recommended. The exchange will technically have control of your crypto, and additionally, there is the chance of your account being hacked.
Move it to a hot wallet, which is a digital wallet on the internet, a computer, or a smartphone.
Move it to a cold wallet, which is any kind of storage not linked to the internet. Typically the most popular types of cold wallets are hardware wallets (devices designed for storing crypto).
Both hot and cold wallets store your private keys, that are what give you usage of your crypto. If some other person obtains your private keys, they can steal your crypto.
Although plenty of folks use hot wallets with no issue, there are risks involved. The company behind the hot wallet stores your private keys on its web servers. If it gets hacked, your private keys could be vulnerable. There’s also the possibility of malware infecting ipad holding your hot finances.
A cold wallet eliminates those risks. Your private keys are stored offline in the wallet. Even when you hook up a hardware wallet to your computer, your private keys do not have exposure to the computer. You might connect a frosty pocket to some type of computer infected with malware without putting your crypto vulnerable.
When should you use a cold wallet?
A rule of thumb is the fact you should use a cold wallet when you have more crypto than you would be comfortable losing.
For small amounts of crypto, a cold wallet isn’t necessary. When you have $100 worth of crypto or less, the cost of a wallet would be just like your crypto’s value. It generally does not make much sense to pay $50 to defend crypto that’s well worth $50.
Taking the normal price range for cold wallets into consideration, you might consider getting one when you have about $250 or more of crypto. Everyone’s risk tolerance differs, and there’s no one-size-fits-all answer. But considering how much crypto prices can rise, it’s good to be mindful. A one-time $50 or $100 purchase isn’t much considering how valuable crypto can be.
A cold wallet is also a good idea if you’re planning to make crypto a part of your investment portfolio. If you know you will be putting money into crypto regularly, buy a wintry wallet in early stages to obtain safe storage.
Cold wallet options
When you’ve decided to obtain a cold wallet, another question is which cold pocket you should pick. There are very a few options out there, nevertheless the two most popular brands are Ledger and Trezor.
It’s worth noting that Ledger’s reputation took popular after a data breach in July 2020. Its hardware wallets weren’t affected, and nobody lost any crypto. But over 250,000 customer records were leaked, and a lot of those customers have been targets of threats and phishing scams. Regardless of the breach, plenty of crypto enthusiasts still vouch for the grade of Ledger’s two wallets:
Ledger Nano S for $59
Ledger Nano X for $119
Trezor hasn’t had any security issues. Its wallets are also open source, which is good from a transparency perspective. There are some complaints about the design of its wallets, particularly that they aren’t user friendly. Regardless of the occasional criticism, Trezor’s wallets usually get high marks. It provides two, as well:
Trezor One for $60
Trezor Model T for $194
Before buying a cold wallet, spend some time shopping around and reading reviews. Each cold wallet has another design and features. The types of cryptocurrencies you can store also be based upon the wallet you select. Compare your alternatives so you will find a frosty finances that works for you.
For serious crypto investors, a cold wallet is a good choice. Affordable options can be found, which means you don’t need to invest much to get one. You’re probably buying crypto hoping it’ll be worth a lot more later on. A cold wallet ensures you have a safe destination to store it for years to come.