For the people getting started with Bitcoin or other cryptocurrencies, getting confused in their ways and practices is common. From function to storage, there is a lot to learn about Bitcoins. Knowing more about your options when it comes to cryptocurrencies will help in the decision-making.
Wallets that hold cryptos are referred to as hot and cold storages with their own respective properties. With so many methods of storing Bitcoins, deciding the best and the worst methods becomes confusing, especially for the beginners. In this article, we will cover everything you need to know about Bitcoin Cold Storage.
What are Bitcoin Cold Storages?
Cold storage, or cold wallets, refer to complex, small devices used to store cryptocurrencies. These cold storages are encrypted with special security codes that protect your crypto coins. It must be noted that the accessibility of the stored coins is not compromised by their nearly unshakable security.
On the other hand, hot storages are digital crypto storing wallets that can be available anywhere from the internet to your desktop. As you can guess, the debates between cold and hot wallets as to which is the superior choice never end. So, before we discuss some of the best cold storages out there, Let’s weigh both kinds and try to answer this question.
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Cold Storages vs. Hot Storages
There are a lot of takes from which this question of superior crypto storages choice could be answered. We could compare costs, ease of setup or installation, security etc, and then decide for ourselves depending upon which take we consider more important than the other.
Security should be the primary concern in deciding which wallet to choose. If the wallet isn’t secure then the costs, ease of setup, options it provides, etc, are of no use. You wouldn’t be thinking about any of those features with all your crypto coins hacked and stolen because you chose them over security.
Now let’s take a look at the advantages and disadvantages of both hot and cold wallets and try to answer which is better.
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Bitcoin Hot Storage- Pros and Cons
If we compare the overall usage of hot and cold wallets, it wouldn’t come off as a surprise that hot wallets are more popular. There are many reasons for this. First, hot storages are generally free. There are numerous websites that offer hot wallets for storages absolutely free of cost.
Another reason behind their popularity is the versatility of hot wallets in storing different cryptocurrencies. They offer storages for almost every cryptocurrency in the market and hence are convenient. Even the new or less-popular cryptocurrencies have at least one designated online or desktop wallet which is often created by that currency’s creator. This factor alone contributes to the soaring numbers of hot wallets users.
The problem with the hot crypto storages is that what they offer in cost and convenience is traded off in safety. Hot wallets obviously have to be connected to the internet. This increases its susceptibility to a potential breach. This wouldn’t be an issue but potential hackers and cyber thieves make it one.
Many hot storages have had instances of security breaches. This is why they always try to impart stricter security on their websites or apps. The popular and acclaimed hot wallets are those that release security updates and other improvements periodically. While this does promise lesser chances of security attacks, it doesn’t offer any compensation to the people who already got scammed.
Another big disadvantage of digital crypto storages are the technical glitches. Your wallet keys are stored inside the servers these online wallets use. Although there isn’t a problem when the website is running, you are one technical malfunction away from losing your key and your crypto coins forever. Some websites even require their users to sign online documents freeing themselves from all responsibilities if something like this happens.
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Bitcoin Cold Storage- Pros and Cons
For the people who prefer to store their Bitcoins offline, Bitcoin Cold storages is the best choice. Although they’re not even near in comparison to hot storage’s popularity, cold storages are getting more popular day-by-day. The primary reason behind this is the security cold storages offer as compared to other storages options. They are currently the safest choice for storing your crypto coins.
Since the cryptos are stored in a small device, they’re portable and easy to hide. You can lock your cold wallet up in a safe or a strongbox without any hassle. Cold wallets do not require any internet connection to function, thus eliminating potential risks and security breaches.
Other than that, cold wallets provide their users a sense of control over their cryptocurrency which hot wallets fail to do. With the control of your wallet, you get to decide whether to lock it or keep it in your pocket all day. Cold Wallets ensure that you’re in charge of your money from transaction to storage, without third-party interference.
The cold wallets have the same trade-off that hot wallets do, just reversed in direction. What they offer in security is traded off in cost and compatibility. As you can guess, storing your Bitcoins in Bitcoin cold storages is very costly. So the decision should be subjectively based on the number of Bitcoins that you need to store.
If you have a huge amount of Bitcoins to store, then securing them through cold wallets is actually worth it. On the other hand, if you just need to store a small amount then it’s better to consider hot storages. You can easily get your hands on Bitcoin cold storages within a price range of $50-$100.
Another major disadvantage that cold storages have is lower compatibility for different cryptocurrencies as compared to hot storages. Cold storages generally store only a few popular cryptocurrencies in the market. With the constantly increasing number of cryptocurrencies, the process of creating new cold storages options for those crypto coins is really slow.
Best Cold Wallets
Trezor is the first and one of the most popular Bitcoin cold storage devices in the market. Trezor is the first choice for many people because of its level of security and multi-functional features. It passes all the checklists of requirements for a cold storage, from physical sturdiness to security from malicious viruses.
Nano Ledger S
The Nano Ledger S gives tough competition to Trezor in the market. This is because it offers great security at a comparatively lower price. Its popularity is also accounted for by its small size and compatibility, compared to other physical wallets out there.
KeepKey is another great Bitcoin cold wallet which quickly became popular due to its beautiful and sophisticated design. It is not as popular as Trezor or Nano Ledger S because of being relatively new. Most of the specifications it offers are identical to Trezor, except its unmatchable design.
In conclusion, Bitcoin cold storages are a great way of storing Bitcoins. They are safer and provide way more security than hot storages. The decision between hot wallets and cold wallets should depend upon the amount of Bitcoins that you want to store.
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