What is Cold Storage?
Cold storage refers to ‘storing cryptocurrency offline’, typically with the help of hardware devices, to minimize the risk of unauthorized access by hackers. It is important because it provides an extra layer of security, protecting funds from online threats such as hacking, malware, and phishing attacks. You don’t store cryptocurrency on these hardware devices, but the devices help you interact with your wallet. Cold storage ensures that cryptocurrencies remain safe even if online wallets or exchanges are compromised.
Self-custody & Cold Storage
Self-custody is important in the world of crypto. This is because if you don’t own the secret key, you don’t own the actual crypto. We can give some examples of past experiences with centralized exchanges such as FTX or MT Gox. They didn’t exactly operate by the book (in various ways) resulting in bankruptcy and many victims with losses totaling over the billions.
Cold storage is a ‘cryptocurrency wallet provider device’ in which you have an additional secure element. Please note and understand, these wallets are just interfaces to interact with the blockchain. You don’t store crypto actually on a device, but still normally on the blockchain just with an additional layer of security.
Known brands, have a part of their code open source, but not everything. Technically seen this means that the part that is not open sourced, could contain malicious code. We simply can’t verify and in this case you handle based on trust. Do you trust the company providing the hardware wallets? Always DYOR before you choose which one works best for you.
Which more known Cold wallets are out there?
On this site we will discuss the more known brands for cold storage out there. Always DYOR, to see which one fits best with you. The cold storage wallets that we’ve linked below are the most commonly used hardware wallets. They seem like good and safe choices for the average or beginning crypto enthusiast because the main benefit from these brands is their user interface: it is easy to setup, stake, or interact with it.
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If you really want hardcore safety, you must make your own hardware wallet. We might cover this part in the future on how to do so.
Not every hardware wallet supports every crypto!
Now that you know what cold storage is, which ones are out there, and why self-custody is important, it is time to explain that not every cold storage will support every crypto. The more known brands support a wide variety of blockchains, but to see what fits you, you will have to research a bit.
Typically it makes no sense to purchase a cold storage if you plan to hold 500 USD or less in crypto. Hot wallets or exchanges are safe enough to bear those amounts. Cold storage is to securely stow away larger amounts. Please note, with certain wallets and on various blockchains you can still stake your assets to accumulate more. Your coins don’t have to do nothing while being in cold storage ;)!
Cold storage can basically seen as an extra layer of security to the traditional way of interacting with the blockchain. You don’t store your crypto ON a Ledger for example. You simply sign transactions with them to interact with the blockchain.
