In our recently published article, What Is a Hot Wallet, you learned what a Hot Wallet is. It’s an application that uses public/private key encryption to safely store your crypto. Today, we’re going to talk about cold wallets.
But what if one wants an offline place to store his or her crypto? Well, they would be in luck. These are called cold or hardware wallets. What one needs to understand about hardware wallets is that they’re not a silver bullet, meaning – it’s not invincible to theft. However, they are safer and less vulnerable than hot wallets. Most prominently in the respect that an attacker stalking the web cannot become aware of the private keys once the transaction has been broadcasted.
According to an article from investopedia.com,
Cold storage resolves this issue by signing the transaction with the private keys in an offline environment. Any transaction initiated online is temporarily transferred to an offline wallet kept on a device such as a USB, CD, hard drive, paper, or offline computer, where it is then digitally signed before it is transmitted to the online network.https://www.investopedia.com/terms/c/cold-storage.asp
Where can I buy a cold wallet – and what kind?
The best way to find a hardware wallet is by going on google and searching for hardware wallets. If you want to buy the Ledger Nano S, for example, then you can do that on their website at shop.ledger.com.
You can also find almost any hardware wallet on major online retailers like Amazon. There are three major brands to choose from : Ledger, Trezor, and KeepKey. Best to stick to a reputable brand. Make sure to do your research into the brand and make sure they’re legitimate.
Risks of hardware wallets
While most of the crypto community agrees hardware wallets are the safest place to store crypto, it doesn’t mean that they’re not vulnerable to attacks. According to an article from coindesk.com, the wallet companies Trezor and KeepKey had a vulnerability that a competitor of theirs exposed. An excerpt from the article reads,
ShiftCrypto, the Swiss company that manufacturers the BitBox hardware wallet, has disclosed a potential man-in-the middle ransom attack vector on the rival Trezor and KeepKey hardware wallets. A ShiftCrypto developer known as Marko discovered the vulnerability in the spring of 2020, and notified the Trezor and KeepKey teams respectively in April and May.Coindesk.com
Then there was the December 2020 Ledger hack where some people’s personal information was retrieved. According to an article from Forbes.com, the 2020 Ledger hack made people’s funds vulnerable to theft:
“As of December 23, they said that it was “technically impossible” to make an assessment of the severity of the data breach. They warned that it was safe to assume that “your funds could be at risk of theft.”Forbes.com
Fortunately, Ledger has fixed this issue by releasing a software update. However, it is important to be aware of risks from all ends. And there are ways to minimize risks. For example, instead of only having one hardware wallet, you can have several. This isn’t a good option if one’s funds are limited. But, if one has a lot of crypto, then it would be wise to have several. That way, if worse comes to worse, you’ll always have a backup.
Hardware wallets are no doubt the safest way to store one’s cryptocurrency. Please do your own research before deciding what hardware wallet is best for you.
Products mentioned in this article are not commericial and for educational purposes only. Also, this article is not financial advice.