Here's Why Many People Advocate for the Cold Wallet Storage of Cryptocurrencies

Major Cryptocurrency Storage Options Available to Crypto Holders

The cryptocurrency ecosystem is a generally new tech space and despite the current strides we have with the technologies in the crypto space today. However, they are all still developing and not yet backed by time-tested engagement. Furthermore, the investors making a move into the digital currency space must be aware of the options they have to safeguard their crypto holdings. 

In highlighting the options to store cryptocurrencies, we must highlight the top channel(s) through which people can buy cryptocurrencies, as most of these options have inbuilt storage systems. One primary way to buy cryptocurrencies is through crypto exchanges, and popular exchanges amongst these include Coinbase, Binance, Kraken, Huobi Global, and OKEx.

These exchanges serve multi-functions that also includes the storage of the cryptocurrencies they sell. This option of storing digital currencies online and on exchanges is known as hot wallet storage. While not limited to exchanges only, any option in which the crypto-holder safeguards the coins online through a third party is generally tagged with this storage channel. 

Besides the hot wallet storage options, crypto holders can also store their assets offline in what is known as cold wallet storage. This involves the storage of Bitcoin (BTC), Ethereum (ETH), and other crypto assets in physical hardware wallets such as the Trezor One, Ledger Nano S, and Ledger Nano X to mention a few. While these hot wallets are arguably effective in storing crypto for the owner, it comes with a significant cost involved in the purchase of the wallets.

The Dangers of Hot Wallet, the Edge of Cold Wallet Storages 

One of the major ways in which the cryptocurrency exchanges of today advertise or promote their platforms is to reassure both new and prospective customers of how secure their platforms are. While many users rely on these exchanges to carry out a number of cryptocurrency transactions, it is pertinent to note that online systems are very prone to cyber-attacks and other forms of mishaps as seen in the case of renowned Canadian exchange QuadrigaCx, whose founder died, locking up all the private keys.

The hacking or attacks of renowned cryptocurrency exchanges predates this COVID-19 filled year and will likely still continue into the future, and crypto users may need to take heed to avoid the loss of funds through hacking.

Hardware wallets are not predisposed to the incidence of hacking or cyber-attacks which actually makes people advocate for their use. Nonetheless, with the responsibility of safeguarding the private keys left for the users, the use of cold wallets is also not devoid of its own risks, as the private keys may be lost if not kept properly.