What are cold wallets and why are they needed?

A cryptocurrency wallet is needed to keep your digital assets off exchanges. Let's say  you exchanged fiat money for bitcoins through mason-ex.com, but where to keep the cryptocurrency in this case? Crypto wallets are needed for these purposes. There are several types:

• cold wallets;
• hot.

To use the wallet, you must have public and private keys. Public – the address of the wallet itself. Private – it's like a card pin code, it provides access to assets stored on the crypto wallet.

Types of wallets

Cryptocurrency wallets come in hot and cold varieties. The former provide online storage of digital assets. The second ones are offline. There are hot wallets:

• desktop software;
• software mobile;
• WEB.

Desktop ones are installed on a computer; an SSD drive can be used for installation. There are thick and thin software wallets. Thick ones download the entire blockchain chain and are constantly synchronized with the network and are highly reliable. Thin ones store data partially on third-party servers. Therefore they are considered less reliable.

Mobile wallets – These are applications for smartphones or tablets. 

WEB wallets are accessible from any device because they work through a browser. All data is stored on remote servers.

Every experienced crypto trader knows what a cold wallet is and uses it. Because this particular method of storing digital assets has a high level of security. 

A cold wallet is a device or application necessary for storing cryptocurrency without a constant connection to the Internet. This type has its advantages and disadvantages. The main advantage of cold wallets – This is the maximum safety of digital assets. Only the owner has the private key, the Internet is required when performing any transactions, the rest of the time the wallet works offline. 

The disadvantages of cold wallets are lower speed of operations, high traffic consumption and high cost.

How to choose a cold crypto wallet

Experienced crypto investors choose cold wallets. But how to choose the most suitable one?

It all depends on what coins you plan to store. There are multi-currency crypto wallets, you can hold different assets and tokens on them. Let's look at the nuances of all types of cold wallets:

1. Hardware – the safest, but very expensive. It is very difficult to hack such a wallet. If the media is lost or broken, you will only be able to access digital assets using the seed phrase.
2. The most popular hardware wallets: KeepKey and Ledger Nano S, X.
3. Paper – This is a regular printed sheet on which the public and private keys are written. This option is not the best, as there is a risk of accidentally throwing out or losing the sheet. 
4. USB flash drive. This is a simple flash drive on which keys are written. The risk of hacking is minimal, but there is a possibility of physical loss. 

Which wallet to choose depends on the preferences of the cryptocurrency holder. If security is a priority, then it is better to opt for a hardware cold crypto wallet. 

How to use a hardware crypto wallet

Step-by-step instructions may differ slightly depending on the specific device model selected. Below are general instructions for understanding how to use hardware wallets:

1. Buy and install software. Please note that you should only buy a hardware wallet from reliable manufacturers (Ledger, Trezor, Ngrave). It is important that the device is sealed. Go to the manufacturer's official website and download the software.
2. Connect wallet. The wallet must be connected to the PC using the cable included in the kit or via Bluetooth or NFC. To link your wallet, you need to follow the instructions on the screen. Be sure to save your seed phrase in several offline places. 
3. Add funds and complete the transaction. The software has a function “add cryptocurrency”. This can be done using a public address or QR code. In order to send digital assets, you must enter the recipient's wallet address and amount. Then you need to confirm the transaction.

After everything is done, you need to turn off the device according to the instructions.