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How and Why to Set up Cold Storage for Your Cryptocurrency
There is either cold or hot storage for your crypto, and it refers to the wallets. If you’re new to cryptocurrency, it’s important to note that there are many ways to store your crypto. Cold storage is an effective way to do that but requires a bit of knowledge. Also, because it is essentially about storing your crypto offline, it’s one of the safest storage methods. So, this article goes over how and why to set up cold storage for your cryptocurrency.
How to Set Up Cold Storage for Crypto
Cold storage is also known as hardware wallets or offline wallets. Moreover, the fact that cold storage doesn’t rely on the internet puts it at a much lower risk of getting compromised. Here’s what you must do to set up cold storage for your crypto.
Create an Offline Account for Your Crypto
You will need to provide an address and private key to do so. This address and key will never be inserted online until you’re ready to spend your crypto.
Make a Paper Wallet
Arguably, a paper wallet is the most secure form of cold storage for crypto. A paper wallet is a wallet that you can generate from your crypto website.
Save the Page
It’ll help to save the paper wallet page locally onto your computer. Press the shortcut key Ctrl+S to do so.
Disconnect from the Internet and Create Your Private Key
After you disconnect from the internet, close the website browser, and open the saved page file on your computer. Type in some random characters in the textbox present on the page for randomness. Doing so will result in a random private key for your crypto. The result of this process will ensure that your key was never created on the internet.
Print the Page
Next, you should print the page with the address and private key without reconnecting to the internet. Make sure that you disconnect your printer from the internet (i.e., its internal Wi-Fi connection). It’s imperative that you perform that step to ensure that your private key is never connected to the internet.
Printing the page will provide you with an offline copy of your crypto address that you can load later on your respective crypto for cold storage. If you’re creating cold storage for Bitcoin, you will also have the QR code that has the corresponding private key and its QR code.
You will need this printed paper to access your crypto later. So, you should laminate the piece of paper and keep it in a safety deposit box in your bank. You could also keep it a fire-proof safe in your home. You can connect to the internet after printing the paper and closing the saved file.
Make a Hardware Wallet
You can also make a hardware wallet instead of a paper wallet. A hardware wallet is typically a flash drive that holds your private key securely. You can rest assured that your hardware wallet won’t be affected by viruses because they don’t come into contact with potentially vulnerable software or a network-connected computer.
It’s best to use an open-source device for your hardware wallet. This is because the community can have the device tested and determine its effectiveness in keeping the saved data secure. Thus, you won’t have to rely on the word of the manufacturer.
Why Set Up Cold Storage for Your Crypto
If you’re not sure why cold storage for crypto is arguably the most secure methods, here’s what you should know.
Lower Risk of Theft and Fraud
Cold storage for your crypto is entirely offline. Therefore, there’s virtually no risk of theft and fraud through internet viruses or hacks. You won’t need to trust any third-party service to keep your crypto safe and secure. As a result, you won’t have to fear being scammed by another party.
You Can Physically Store Your Crypto
Crypto may be an online investment, but cold crypto storage allows you to store your investment physically. Therefore, you can keep it in a safe and out of sight. Moreover, both paper wallets and hardware wallets are compact and easy to transport and store. Therefore, you won’t have to worry about transporting it if you ever feel the need to.
You Have Full Control over Your Crypto
You may also feel a strong sense of control over your investment through this method. If you like, you can keep it on your person at all times to ensure it never leaves your sight. Thus, you have full control over its safety, storage, and its use (in terms of transactions).
Some Disadvantages to Consider
While it’s definitely a safe option to set up cold storage for your cryptocurrency, it can come with some potential disadvantages. It’s best to know about these so that you make a storage decision that’s best suited for you.
May Not Be as Easy to Access as Hot Wallets
Hot wallets, i.e., online wallets, can be easier to access and more practical than cold storage.
Can Be Costly
You should not consider cold storage for your crypto if you have a small amount of it. This is because hardware wallets can be expensive, and they may not seem worth it. You can expect hardware wallets to cost you anywhere between $50 and $100.
Last Few Words
Cold storage for crypto is no doubt the safest storage solution. That said, it’s best used for a sizeable investment, and you should consider it if you are confident that you can physically keep your crypto safe.
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