Cold wallet, hot wallet, what’s the difference? The term “cold storage wallet” is used to indicate that the crypto wallet is “offline” – meaning it is not connected to the internet. Cold storage crypto wallets, or cold wallets, can be in various forms–including a physical USB drive, a hard drive, a piece of paper (also known as a paper wallet), a CD, or even a computer which is completely disconnected from the internet or any wireless transmissions.
Benefits of a Cold Storage Crypto Wallet
- Protects from unauthorized access and wireless hacking of wallet
- Holds your wallet keys offline, which means it holds access to your cryptocurrency funds offline
- Not relying on a third party such as a centralized exchange to safeguard your funds
Cold wallets by design are safer than “hot wallets”, because there are less ways for bad actors to access it. With a cold wallet such as Ledger Nano X, you could keep it safely locked away in a fireproof safe, or your favorite super-secret hiding spot which only you know about. Once connected to the web via USB or Bluetooth and unlocked with your password, you can transfer your cryptocurrency to a different address or exchange. However, losing your physical cold wallet could result in complete loss of access to your private keys, and your funds. However, all is not lost, as most cold wallets such as the Ledger Nano X offer a mnemonic key phrase, which is a 12-word or 24-word security phrase which you can write down (and again, keep in a super-safe place) which can access your private keys. You can see the differences of a cold wallet vs hot wallet in our next breakdown.
Best Cold Wallet
Now that you know the importance of keeping your crypto funds safe with a cold wallet, you should do some research on which type best fits your needs. Our favorite, best cold storage wallet in today’s market is the Ledger Nano X. You can see our full review on it here.