What is a Cold Cryptocurrency Wallet?
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What Are Cryptocurrencies, And Why Are They Needed At All
Why do we need cryptocurrencies when there are plenty of other ways to invest money? Of course, you can invest in real estate, buy shares in the stock market, or open a deposit in the bank. All of these ways work great but in the long run. Cryptocurrency is a faster way to build up capital. The risks are higher here, but if you calculate it correctly, you will make much higher profits than traditional investments. Of course, it would help if you had a strong password and one hundred percent privacy, and your crypto millions are protected.
The easiest way to understand a cryptocurrency wallet is through the analogy of a bank card. Ordinary money is not stored on the card itself but in a bank account. So is cryptocurrency: it is not stored in a wallet but in a blockchain. The card has two sets of numbers: its number, which can be used to transfer money to you, and your password, which gives you access to that money. It's the same with a cryptocurrency wallet: the public key allows other users to send you money, and the private key you use to access. When you transfer money from another user, a new block appears in the blockchain where the transaction is described.
The primary purpose of a cryptocurrency wallet is to help the user with digital assets. Some wallets work with one currency, and some - have multicurrency; they can store all popular cryptocurrencies - Bitcoin, Ethereum, Litecoin, Bitcoin Cash, Monero, and others. All wallets are divided into paper, hardware, and software, and hot and cold.
The Essence Of Cold Cryptocurrency Wallets
Unlike a hot wallet, a cold wallet works without the internet. As a result, it is better protected against hacking, so a cold wallet is an excellent choice for those puzzled about long-term secure investing.
"Cold" already means inactive and not easy to use. And it is. It is usually a separate device, a physical "wallet" that can be touched, hidden, or lost. The most common use for a cold wallet is a flash drive that can be plugged into your phone or computer. Some use a regular USB flash drive, while others use special devices with a Secure Element chip. The latter wallets are called hardware wallets.
The main advantage of cold wallets is that no one can steal access to it virtually. And to manage your assets with a cold cryptocurrency wallet, you need to create a coveted seed phrase. It is a sequence of any 12, 18 or 24 words - a kind of PIN code that lets you access the wallet and all operations with it. The same combination of words will save you if you lose the private key - something like a code word you write in the contract with the bank for the card. So if your wallet is hidden and no one knows the seed phrase, it will be impossible to open the information of the disadvantages of such a wallet - only the purchase of an additional device to store data. But in the context of security, this does not seem to be a problem.
Features Of Hardware Cryptocurrencies
One of the secure cold cryptocurrency wallets is a hardware one. All information is stored on a separate physical device that connects to your computer through a USB port. It looks like a flash drive, so strangers won't know that you're holding not a folder of Word document files but a considerable amount of money. Some devices can even be connected to the phone - via Bluetooth - and work with assets. Hardware wallets usually have several levels of security: the device asks for a passphrase or a fingerprint.
A hardware wallet creates your private and public keys - you don't have to make anything up. It is impossible to hack into such a wallet, but it is easy to steal a "machine". So here, the security of your capital depends on you and how far you will hide your wallet.
Advantages
Disadvantages
Top Hardware Wallets For Cryptocurrency
Trezor
Trezor is a pioneer of cold storage that many consider a practical machine for bitcoin and other cryptocurrency transactions. The security of digital assets is ensured through cryptography and closed transactions that take place only within the wallet's architecture. Transactions are confirmed by pressing a button and entering a password. It also has a seed phrase, which, as we have figured out, is very important.
Ledger
Ledger is a relatively new but no less secure cryptocurrency management tool. All private keys are protected through wireless communication, and the owner's location is irrelevant. The device is safeguarded similarly to bank cards - with a certified chip. In addition to the chip, this crypto wallet has a screen to confirm transactions and two activation buttons.
One of the benefits of Ledger is Bluetooth support for communicating with iOS and Android devices.
Tangem
Tangem is a handy single-currency cryptocurrency wallet that allows you to buy, store, sell and transfer cryptocurrency. For example, a Tangem Note Bitcoin or Tangem Note Ethereum single-currency wallet can be shared with the desired amount in exchange for goods or presented as a regular banknote. An inexpensive and convenient way to store cryptocurrency and use it in everyday life.