An important part of owning a cryptocurrency is having a secure place to store it. Crypto is a popular target for crooks and thieves, and if you don’t protect yours, you could lose it.
There are two types of crypto wallets that you can use for this: hot wallets and cold wallets.
The main difference is that hot wallets connect to the internet, while cold wallets stay offline. This makes hot wallets more convenient to use, but not so secure. There is much less risk of a cold wallet being hacked compared to a hot wallet.
Another difference is the price. Most hot wallets are free. Cold wallets typically cost between $ 50 and $ 150. For this reason, crypto investors often wonder how much the security of a cold wallet is worth. First, let’s take a look at exactly what makes a cold wallet the best option.
Why a cold wallet is the best crypto storage
When you buy crypto, you have different storage options:
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- Keep it wherever you bought it. Some of the best cryptocurrency exchanges keep the coins in their own cold storage for added security. However, this is still not recommended. The exchange will technically have control over your crypto, and there is also the risk that your account will be hacked.
- Move it to a hot wallet, which is a digital wallet on the Internet, computer, or smartphone.
- Move it to a cold wallet which is any type of storage not connected to the internet. The most popular types of cold wallets are hardware wallets (devices designed to store cryptocurrencies).
Hot and cold wallets store your private keys, which give you access to your crypto. If someone else gets your private keys, they can steal your crypto.
Although many people use hot wallets without a problem, there are risks involved. The company behind the hot wallet stores your private keys on its web servers. If it is hacked, your private keys could be at risk. There is also the possibility of malware infecting the device containing your hot wallet.
A cold wallet eliminates these risks. Your private keys are stored offline in the wallet. Even when you connect a hardware wallet to your computer, your private keys never come into contact with the computer. You can connect a cold wallet to a computer infected with malware without putting your crypto at risk.
When to use a cold wallet?
Generally, you should use a cold wallet when you have more crypto than you would be comfortable losing.
For small amounts of crypto, a cold wallet is not necessary. If you have $ 100 of crypto or less, the cost of a wallet would be similar to the value of your crypto. It doesn’t make much sense to pay $ 50 to protect crypto that is worth $ 50.
Taking into account the normal price range of cold wallets, you might consider getting one when you have around $ 250 or more in crypto. Everyone’s risk tolerance is different, and there is no one-size-fits-all answer. But given the rise in crypto prices, it’s good to be careful. A one-time purchase of $ 50 or $ 100 isn’t much considering the value of crypto.
A cold wallet is also a good idea if you plan to incorporate crypto into your investment portfolio. If you know that you will be investing money in crypto on a regular basis, buy a cold wallet early on for safe storage.
Cold wallet options
When you have decided to get a cold wallet, the next question is which cold wallet you should choose. There are a lot of options, but the two most popular brands are Ledger and Trezor.
It should be noted that Ledger’s reputation took a hit after a data breach in July 2020. His hardware wallets were unaffected and no one lost any crypto. But more than 250,000 customer records have been disclosed, and many of those customers have been the targets of phishing threats and scams. Despite the breach, many crypto enthusiasts still vouch for the quality of Ledger’s two portfolios:
- Nano S Ledger for $ 59
- Nano X Ledger for $ 119
Trezor had no security issues. Its wallets are also open source, which is good from a transparency standpoint. There are a few complaints about the design of its wallets, especially the fact that they are not user-friendly. Despite the occasional criticism, Trezor’s portfolios generally score high. It also offers two:
- Trezor One for $ 60
- Trezor Model T for $ 194
Before buying a cold wallet, spend some time shopping around and reading reviews. Each cold wallet has a different design and characteristics. The types of cryptocurrencies you can store also depend on the wallet you choose. Compare your options to find a cold wallet that’s right for you.
For serious crypto investors, a cold wallet is a smart choice. Affordable options are available, so you don’t have to spend a lot to get one. You are probably buying crypto with the hope that it will be worth a lot more in the future. A cold wallet ensures you have a safe place to store it for years to come.
Lyle daly owns Bitcoin.
