If you invest in Bitcoin and other cryptocurrencies and want to protect them from loss or theft, using one of the best cold wallets is essential. What exactly are they and how do they function? Plus, which ones are considered the best? We'll provide you with all the details below.
What are cold wallets?
A cold wallet is a method to safeguard investments in cryptocurrencies, providing enhanced security against hackers attempting to access and steal wallet keys remotely.
Cryptocurrency wallets serve to store private keys, allowing owners to securely store their cryptocurrencies while maintaining accessibility. Often referred to as cold wallets, hardware wallets, or USB wallets, their primary function involves storing users' private keys on a physical device, commonly a USB unit.
What are cold wallets for?
A cold wallet simply stores your keys offline on a physical device, which can be anything from a specialised USB to a piece of paper with your private key.
When you want to make a transaction, you need to transfer the crypto funds from the cold wallet to a hot wallet. The hot wallet is connected to the Internet and can process transactions – however, due to being online, it is also vulnerable to hacking.
In other words, cold wallets are for long-term storage of your cryptocurrencies.
How do cold wallets work?
A cold wallet is an offline device that doesn't communicate with any other device until you plug it into a device to access your private keys. Here are some general steps to transfer cryptocurrency to a cold wallet:
- Connect your cold wallet to a computer connected to the internet.
- Select the option to receive cryptocurrency. Your device will then provide you with an address.
- The sender of the cryptocurrency transfers the tokens to the address.
- You disconnect the hardware wallet, which now contains the public and private keys, and the information stays offline.
What are the best cold wallets?
Before mentioning some of the best cold wallets to safeguard Bitcoin or other cryptos, it is important to know a few other aspects:
- Never buy used wallets, even if they are sold by a friend or family member.
- Buy the cold wallet from reputable and recommended manufacturers.
- When buying, you should check the device for pre-installed firmware.
Cold wallets come in various forms, such as hardware wallets and mobile applications like Coinbase Wallet.
Types of wallets to store cryptocurrencies
There are different types of cryptocurrency wallets, so you can choose from different formats to store Bitcoin, Ethereum, Ripple and other altcoins. There are currently five types of crypto wallets:
- Online or hot wallets
- Mobile phone apps: Downloadable applications that can be accessed via your phone.
- Desktop or laptop software: software installed on the PC or laptop
- Paper: You can write your keys on a piece of paper. However, if you lose the piece of paper, you will also lose access to your cryptocurrency.
- Hardware: A type of offline device, such as a USB that allows you to save private keys.
The hardware wallet is typically the most expensive among crypto wallets, but also the safest. Also, keep in mind that buying crypto in general comes with its own risks. Make sure you use one of the best crypto brokers to purchase your digital assets.
Best cold wallet to store bitcoin and other cryptocurrencies
Here are the top three cold wallets on the market:
|Top Cold Wallet
|Ledger Wallet (ledger.com)
Learn more about crypto
Frequently asked questions about cold wallets
Should you buy cold wallets on third-party websites like Amazon?
It's always best to do your research on the cold wallet manufacturer and access the official website rather than third-party websites.
What is the usual price range for cold wallets?
The prices vary significantly among manufacturers and devices. However, it can vary from £20 for a cheap USB or over £200 for an external hard drive.
What happens if I lose my cold wallet?
You can use the recovery phrase to access your keys, but you need to buy a new device or plug the phrase into a compatible hot wallet.