In the previous post, we looked at hot bitcoin wallets and found out why they are regarded as ‘hot.’ I recommend you read it, if you have not.
Anyway, in this post, we are going to focus our attention on yet another form of Bitcoin wallet: cold storage wallet. Of course, this is the opposite of the hot wallet, and has its advantages and disadvantages.
However, before we get into these details, perhaps we should first remind ourselves of what a Bitcoin wallet is. As indicated in the previous post, a Bitcoin wallet is a file that contains details of a public address, where other people will send you Bitcoins, and the corresponding private key, which will enable you access and spend the money.
Cold storage wallets are offline
Now, these Bitcoin files or wallets are deemed cold if they are stored in platforms that are offline.
The main disadvantage of the file being offline is slow access to your Bitcoins. You have to find your private key from the offline storage and bring it back online for you to carry out any transaction.
This might take more time than you have. However, a cold storage wallet is more secure than a hot one, and this is its strongest advantage.
Security is a major push for cold wallets
To appreciate how a cold wallet is better for keeping your Bitcoins, especially those that you do not readily need, you have to acknowledge the insecurity that comes with internet connectivity.
The risk from tech savvy online fraudsters is ever growing. In every passing second, there is someone trying to gain entry into someone else’s online space, often with the intention of stealing.
Since it is lucrative, the Bitcoin payment system has become a huge target for theft. Getting wallets of unsuspecting users is where it all starts. Remember, anyone with access to your private key will access funds in the corresponding address.
Can you have your cake and eat it?
The hot wallets are the easy target since they are online. There, you have the reason some of your wallets need to be offline, or cold. There are two ways to achieving this:
The first one is printing the wallet on a piece of paper and deleting the file from your computer, including emptying the trash.
The second way is saving it in a device that is not connected to the internet such as a flash stick. You can encrypt the file to make it even more secure.
However, how do you get the best of both sides? Have a cold wallet for large reserves that you do not need immediately and hot one for daily expenditure.