How to Use a Cryptocurrency Cold Wallet Safely
The simple fact that cryptocurrencies are decentralized and transactions are done from the point of anonymity of investors has boosted their popularity in recent years.
However, Tvle, who teaches people cryptocurrency basics, says that “the number of threats and fraudulent activities facing the crypto world has risen over the years, causing instability in the use of the digital assets.”
You can watch and learn from one of Tvle’s projects here.
WHAT IS A COLD WALLET?
Cold storage refers to the offline storage of cryptocurrencies to reduce the potential of attack by hackers and online thieves.
A cold wallet does not need an internet connection and your private keys are saved offline, reducing the vulnerability of unauthorized access.
Bitcoin cold storage requires the physical access of a crypto investor, making it a safer alternative to online storage on exchanges for bitcoins or other digital currencies.
TYPES OF COLD CRYPTOCURRENCY STORAGE WALLETS
Cold wallets entail storage of digital currencies and their associated private keys locally in physical devices such as USB drives where no internet connection is required.
This will keep off any hackers attempting to infiltrate your private keys without authorization.
Here are some of the popular secure cold wallets:
- Trezor Model T — This cold wallet offers high-security levels with the use of a PIN number required to access the storage. On setting up, it generates a 12-word seed that an investor can use to recover the wallet. The wallet supports a number of cryptocurrencies, including Bitcoin, Litecoin, Ethereum and the ERC 20 Tokens, Bitcoin Cash, Bitcoin Gold, Namecoin, and Dogecoin.
- Ledger Nano S — Like the Trevor, the Ledger Nano S requires a PIN number for access. It also generates a recovery seed on setting up. Your private keys are securely stored in the hardware and access is gained by plugging the device into a computer and entering the PIN number. The Ledger Nano S completely backs up a user’s wallet in case of loss of the device. It supports several cryptocurrencies and requires users to physically push a button to approve and execute transactions, which boosts its safety and security standards.
- KeepKey — This user-friendly cold wallet requires hooking of the hardware to a computer. It uses a randomization system and pin code that limits the infiltration of malware. The mnemonic seed generated for backing up the wallet is between 18 and 24 characters in length. KeepKey supports a few number of cryptocurrencies, including Bitcoin, Bitcoin Cash, Ethereum, Litecoin, Namecoin, and Dogecoin.
SAFETY FUNDAMENTALS FOR COLD WALLETS
Here are some things you can do to keep cold cryptocurrency wallets secure and private keys safe.
- USE STRONG PASSWORDS
The first step to ensuring the safety of your Bitcoin wallet is the use of secure passwords on your devices. The strength of your passwords is key to ensuring the safety of your digital assets.
Weak passwords provide an easy avenue for attackers to compromise your wallet’s security. You should back up or write down your passwords and keep them in a safe place away from the prying eyes.
- ENCRYPT YOUR WALLET
How to store cryptocurrency offline without sufficient protection measures is difficult. Therefore, encryption is essential for protecting your wallet’s PINs and passwords. It will keep your wallet safe from malicious people who are out to steal your crypto investments.
- REGULARLY BACKUP YOUR WALLET
Performing frequent backups to your wallet ensures that your digital coins are well protected in case you lose the hardware or it malfunctions. Backing up allows you to recollect the data as originally stored in the wallet.
Furthermore, you should store backups in multiple locations to increase the chances of retrieving your original details in case you lose your paper wallet or it malfunctions.
- INCLUDE MULTI-SIGNATURE SECURITY
In case your cold Bitcoin wallet is compromised, using multi-signature security deters intruders from accessing your coins.
This keeps your hardware wallet safe since you are the one with sole control; the coins can only be accessed once all your multiple signatures are verified.
- SAFELY KEEP YOUR WALLET’S RECOVERY SEED
Also known as the mnemonic seed, the seed phrase allows you to recover all the information required to access the cold wallet, in case of a hardware failure.
You should write the recovery seed down and securely keep it in a remote location. If the hardware malfunctions, you can use the write up to reinstate the wallet and restore your digital currency.
The online storage of digital assets increases the risk of scams and theft despite the use of third-party custodial services.
Phishing scams, fake wallets that confuse users, and illegitimate cryptocurrency schemes are some of the ways fraudsters and unscrupulous people swindle investors of their hard-earned cryptocurrencies.
Therefore, if you can use a cryptocurrency cold wallet safely, you can safeguard your digital currencies from unauthorized exfiltration.
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