How to use cold storage to secure bitcoin, cryptography
Ether has dramatically outperformed bitcoin since the two cryptocurrencies bottomed out in June 2022. Ether’s gains have come on the heels of investors anticipating a major overhaul of the ethereum blockchain called the “merger.”
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If you’re about to sell out on all the latest in the crypto space, there’s another option worth exploring. Cold storage can protect your digital assets by taking them offline and storing your crypto in a digital wallet. Since these digital wallets are not connected to the internet, they are vulnerable to hacking.
The recent fall of FTX is a great example of how it pays to keep some or all of your cryptocurrencies cold. When your crypto is on an exchange, like FTX, you can only access those assets if the exchange is able to distribute your funds. If that exchange gets hacked or mishandles funds, your money could be gone.
The downside of cold storage is that your assets are less liquid and harder to trade quickly because you have to go through multiple security steps to access your funds.
If you’re interested in moving your crypto to cold storage, here’s how to get started.
Types of cold storage bags
There are a number of cold packs that you can buy to get you started. Not all cold storage wallets support all tokens. Here are some of the more popular options.
Leger has two cold wallets on the market: the Ledger Nano S Plus, which costs $79, and the more expensive Ledger Nano X.
Depending on the model you get, these devices can connect to your computer with a USB cable and an iOS or Android enabled mobile device, or Bluetooth capability.
It supports more than 5,500 types of cryptocurrencies. It is worth noting that Ledger suffered a hack in 2020 in which 1 million email addresses were leaked, but no crypto-assets were stolen.
Trezor has an entry-level model that costs $72, as well as a Model T that costs $213.
The $213 cold wallet is similar to the Ledger Nano X, except it lacks Bluetooth capability. This is intentional, as some are concerned that Bluetooth is susceptible to hacking. It is also compatible with a web browser, desktop operating system and is supported by Android. However, there is no support for iOS.
Instead of using USB or Bluetooth connections, Ellipal’s Titan wallet uses QR codes and starts at $119.
This device supports more than 10,000 types of tokens.
How to move your cryptocurrency to cold storage
It is important to buy the cooler directly from the manufacturer. The last thing you want to do is end up with a device configured with a known password, designed to trick you.
1. Connect the cold storage device to the computer.
2. Download the software provided with the cold wallet.
3. You will be given a seed phrase or security code. It’s best to keep this code offline and safe, where it won’t be lost or accessed by others. Write it on a piece of paper and put it in a box.
4. Each type of cryptocurrency (eg bitcoin, ethereumor tie up) needs its own wallet. Follow the instructions to create a new wallet for each type of crypto you are trying to store.
5. To access your device, you will need to set up a pin.
6. Once you have a pin, you can add your crypto to your cold storage wallet by clicking receive, and it will show you your cold storage wallet address.
7. To withdraw your cryptocurrency from an exchange, login to the exchange and send the digital assets to the cold storage wallet address.
Keep it cold in a safe place and remember, if you lose your seed along with the phrase, your money cannot be recovered. If you lose your hardware wallet, but still have your seed phrase, you can purchase another hardware wallet and access your assets.
It’s a bit dangerous to know that if you screw up this device along with the seed phrase, you can’t do anything, but at least you have full custody of your assets, unlike when your digital assets are tied to an exchange.