A cold storage wallet for cryptocurrency works a lot like the hot wallets that you use. While a hot wallet is connected to the Internet, a cold wallet does not. You will be able to choose from a variety of different wallets to find one that best meets your security and storage needs.
You’ll find that there are a variety of different cold wallet types, but the most common requires you to have a USB flash drive or USB hard drive, that attaches to your computer to access your cryptocurrency. You simply attach this device when you need to access your cryptocurrency and remove the device so that it cannot be infiltrated.
But there are multiple different types of storage available:
- USB flash drives or external hard drives that you are in full control of at all times.
- Paper wallets where a person has written down their private key and actually keeps this information secret somewhere else.
Which option is better? That’s up for debate. The one main issue with storing your cryptocurrency on a portable device is that devices are susceptible to malfunctions. If your hard drive crashes, you lose all of your Bitcoin, Ethereum, or whatever coin you’re currently storing on the device.
In theory, a paper wallet will be the most secure option that you have. But there is also a chance that you lose your paper wallet and all of your cryptocurrency at the same time.
You have to remember that the block chain actually exists online, so if you’re going to make a transaction, this transaction will need to be recorded in the online ledger. During this time, your cold storage device will have to be connected to the Internet to make the transaction complete.
A lot of individuals will have two different devices that allow them to store and complete these types of transactions. These are called air gaps.
What is an air gap?
This is when you connect your one cold storage device to a device that is always online.