Cold Bitcoin wallet on a flash drive. Bitcoin cold storage

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If you need to store a large amount of cryptocurrency, you can’t think of anything better than cold storage. Cold storage involves physical access to the information storage medium so as to protect it from any attempts to access it via the Internet.

These five methods dramatically reduce the risk of theft:

paper wallets
encrypted paper wallets
signing transactions offline (without an Internet connection)
fragmented secret keys
multisig wallets
hardware wallets

If you use the above methods, you should not worry about hacker attacks. Rather, you should worry about “classic” robbers, and even those who are well versed in Bitcoin technologies. Most of the above methods are well suited for long-term and secure storage of large amounts of cryptocurrency. However, if you have a large Bitcoin fortune, consider hiring a personal crypto security expert to audit your storage methods.

Note: Conduct all experiments with the above methods ONLY with a small amount of Bitcoins you have. Having confidently mastered the proposed techniques, you can operate with larger amounts.

The entire range of proposed methods is available on the website bitaddress.org, which, by the way, for greater security, can be downloaded and launched offline.

After loading the main page, the site will ask you to move the cursor or enter a random set of characters into a special field. This increases the degree of randomness when generating a Bitcoin address. Generating a random sequence of numbers using software methods is very difficult, because a program is always some kind of algorithm, the result of which can be calculated to some extent, which makes it predictable. For applications outside the financial sector, say, for generating hands in the card game ‘scarf’, this is not critical, but for storing large sums of money, high-quality ‘randomness’ is very important.

Paper wallets

A paper wallet is perhaps one of the simplest and most popular cold storage methods. Creating such a wallet involves generating a Bitcoin address and a secret key offline, and recording them on any media that is inaccessible from the Internet. For example, you could write down a pair of keys on a piece of paper, which you then put in your own safe or safe deposit box. At the same time, you can send bitcoins to this address without any problems, where they will be completely safe. When you decide to spend bitcoins from the above address, you will only need to import the private key into the wallet program you are using. After this operation, your storage will turn from cold to hot.

If you need to spend only part of what you have accumulated, and keep the rest in cold storage, then after importing the secret key into a hot wallet, you should immediately send the remaining funds to a freshly created cold wallet (your old storage has already been exposed on the network, and therefore can be compromised ).

Note: Alternatively, you can spend some of your cold storage funds using a method called ‘offline transaction signing’. We'll talk about it a little later.

As long as you keep the private key in a safe place, the paper storage method is quite suitable for storing large amounts of Bitcoin for any length of time. However, be aware of risks such as flood and fire. Also, do not scan, photograph or display your private key on paper, otherwise your vault may be compromised. Your Bitcoins are only as secure as the least secure method you use to store your private key. For example, note that some copiers store every document copied in memory. The most secure way to duplicate a paper wallet is to simply write it by hand.

Encrypted paper wallets

The encrypted paper wallet method improves the security of the above method. Essentially, instead of writing down the private key on a piece of paper, you write down the encrypted version of it. The only way to decrypt it is to know the password. This creates an additional barrier in the path of hackers.

Hundreds of different encryption schemes can be used to implement this method. The most common encryption is BIP38.

Creating such a wallet consists of two steps:

Go to bitaddress.org and move the mouse cursor around the screen until a sufficient amount of random data is generated.
Choose a password and generate a Bitcoin address with a private key.

Your private key will start with the number 6, instead of the 'usual' 5 for standard secret keys.

Note: Passwords used to encrypt data should always be long enough: if they are shorter than 40 characters, they are relatively easy to crack. Based on this, such passwords are also called ‘passphrases’.

IMPORTANT: Losing your passphrase will result in complete loss of access to your Bitcoins.

Therefore, the best solution is to write down your passphrase and store it separately from your paper wallet. As with a regular paper wallet, it is wise to make copies of encrypted wallets for protection in case of theft, fire or flood. Additional security measures are never superfluous. If your encrypted wallet is stolen, you will be able to use another copy before the attacker opens it (if he succeeds).

Signing transactions offline

The offline transaction signing method is an entry-level security that is suitable for Bitcoin businesses or serious users who regularly deal with processing large volumes of Bitcoin. This method requires two computers and is significantly more advanced than simply using paper wallets. A hot wallet is installed on one computer. We will not transfer secret keys here. When you create a transaction, the wallet will ask you to complete an additional authorization step using a second computer, which will contain your private keys and which will not be connected to the Internet. The second computer must also have a wallet installed with the function of digitally signing transactions, where you copy the created transaction. There you create a file containing a digitally signed transaction, which you then copy again to a computer connected to the Internet:

A computer connected to the Internet never comes into contact with private keys. Signing an offline transaction is similar to a setup where you have a financial administrator who does not have check signing authority sign another trusted person or you personally. Although this method is highly secure and can be used to store large amounts of cryptocurrency, making a large number of daily transactions can be quite cumbersome. One potential risk here is the loss of private keys on an offline computer, and therefore you should have copies of them. Another risk is the possibility of your private keys being compromised if your offline computer is stolen or confiscated.

The advantage of the offline transaction signing method is that there is no need to transform your cold storage into hot storage. The main amount of your savings will always be in cold storage, even if you make expenses from this address.

You can use the functionality of the Electrum wallet to sign transactions offline. Another highly recommended wallet for implementing the above method is Armory Bitcoin Client, whose source code is open and was developed on the principles of maximum security. Armory offers many advanced security features. If you are serious about the topic of storing Bitcoin safely and are also an advanced Bitcoiner, you should take a good look at this software.

Fragmented private keys and multi-signature addresses

Fragmented private keys and multi-signature addresses mean that the information needed to spend bitcoins is fragmented and stored in separate geographical locations. Both of these methods have very high levels of security. Large Bitcoin businesses (Bitcoin exchanges, hedge funds, retailers, etc.) should use them. Let's take a closer look at both of these methods:

Fragmented secret keys

Using a cryptographic trick known as 'secret sharing', the secret Bitcoin key is divided into many pieces. To recover a key, a certain number of them is required (m-necessary parts from n-existing ones). For example, the secret key could be
is split into 5 fragments, but to fully restore the key, 3 out of 5 fragments are needed. None of the parts independently contains any significant information on the key as a whole. This strategy is very useful for highly secure Bitcoin storage, since participating companies can store each piece in a separate, secure location. If one of the fragments is damaged or compromised, the storage remains secure. In addition, other fragments can be used to move bitcoins to a new address. Several different cryptographic protocols are used to implement this method in practice. The most popular is Shamir's scheme, the original implementations of which can be easily found on the Internet.

Multi-signature addresses

Using a multi-signature address or multiple secret keys, rather than using a single secret key divided into many parts, also provides a high level of security for Bitcoin storage. Bitcoins are stored in an address that requires more than one key to sign transactions. Companies can assign an existing (total) number of keys, as well as the required number to sign a transaction. For example, a company assigned three existing keys, making two keys sufficient to sign a transaction. For safe storage, businesses can also distribute these keys to different people, thus distributing authority, depriving any one person of sole power over the funds. For example, a Bitcoin bank may decide that no employee (even the CEO or president) has sole control over client funds. Each Bitcoin bank employee can have their own private key for a specific address. Alone, no employee has the authority to move funds. To authorize a transaction, the signature of a specific number of employees is required. The key difference between multiple private keys and multiple fragments of a single private key is that in the first case a particular person will never have complete control over the funds, while in the case of a fragmented key there will be such control. Using multi-signature addresses is an extremely secure and responsible way to manage large amounts of Bitcoin.

Hardware wallets

A hardware wallet is a relatively new method of storing Bitcoin. It is a small electronic device that fits easily in your pocket and stores private keys in a way that cannot be retrieved. A hardware wallet operates similarly to the offline computer wallet described earlier. However, it is undoubtedly more convenient because you can insert it into a computer connected to the Internet.

Your bitcoins are not at risk, even if the computer itself is infected with a virus. When you send bitcoins through your wallet software, the transaction is signed by the hardware wallet, which is usually done with the click of a button. A hardware wallet uses the private key stored on it to sign a transaction, which is then sent to a computer connected to the Internet. An example of a hardware wallet is Trezor, which we have already discussed.

This method is almost as simple and convenient as using a regular hot wallet. At the same time, it is much more secure, because your private keys are in no way exposed on the Internet. Your bitcoins are always in cold storage. One of the disadvantages of the method is that you will need to fork out money for the device itself. Another disadvantage is the possibility of losing the device, which can lead to the loss of your funds (however, hardware wallets provide the ability to restore access to an address using a pre-recorded phrase). Although hardware wallets are a great combination of convenience and security, you may not want to rely entirely on this method alone: there is no data yet on the longevity of these types of devices.

The term “cryptocurrency cold storage” implies an increased degree of security for digital currencies. Cold wallets do not have direct access to the Internet and are better suited for storing Bitcoin or other coins. Analogies can be drawn with the real world.

Hot Cryptocurrency Wallets- these are the wallets that we carry in our pockets. We can easily get money from there to pay off. At the same time, such wallets are stolen, or they are lost.
Cold cryptocurrency wallets- these are rather safes where we keep money. Yes, we can deposit or take some funds from there. But to do this you will have to enter a combination or leave a fingerprint. But safes guarantee a high degree of protection.

The following “tools” are used for cold storage:

Storage devices (flash drives, SSD);
Paper wallets - generated on special websites, work through QR and hash codes;
Cold wallets are essentially the same storage devices, only with improved security mechanisms and additional functionality.

If you have large holdings of cryptocurrencies, you should take a closer look at the latter option. This is the most secure way to store digital currency. You don't have to worry that such a wallet will be hacked by hackers.

Even if it fails, you can easily restore access to your funds. And if the wallet falls into the hands of criminals, they will not be able to do anything with it, because all transactions are carried out using PIN codes. It's really reliable.

What is a cold wallet?

Cold cryptocurrency wallet is a special device created for offline storage of private keys. Private keys are a set of digital records with which transactions are carried out. As is the case with software wallets, during the installation phase of a cold device you need to install seed- a phrase used for recovery. Write down the seed in a notebook, notebook - anywhere and store it in a secluded place.

In the short history of cold wallets, there have never been any cases of them being hacked. They are that reliable. As we noted above, if your device is lost or damaged, you can easily restore access to your funds.

Wallets were originally created for . They currently support several cryptocurrencies, including , and others. Therefore, you do not have to buy a separate device to store different currencies.

Which cold wallet to choose?

The market for devices for cold storage of cryptocurrency has an oligopolistic structure. There are several, or to be more precise, three major players: Ledger, Trezor, KeepKey. In this material we will look at the features of each of these wallets. Perhaps some of you, based on our analysis, will even choose a suitable device for yourself.

Ledger Nano S

This is a product of a French startup. A simple and compact wallet, made with the practicality typical of Europeans.

Among the key functions of the device are seed recovery, an easy-to-use interface with two buttons and a small screen that was added specifically to the Nano S version. In addition, it uses two security chips at once.

The wallet does not contain a battery and you can connect it to your computer or mobile device via USB. At this stage, Ledger Nano S supports more than 10 cryptocurrencies (including Bitcoin) and is the most affordable option on the market. The average cost of a device does not exceed $65.

TREZOR

At one time he became a pioneer among wallets for cold storage. This product was created by SatoshiLabs.

Outwardly, it resembles a small calculator with an LED screen. It was in this wallet that the screen was first added. Wallet protection is provided by 9-digit PIN codes and a recovery seed consisting of 24 words.

TREZOR synchronizes with Android mobile devices. Popular wallets Mycelium, Multibit HD and our own product TREZOR Wallet are supported. Case material: plastic.

The wallet costs $99.

KeepKey

Another affordable cryptocurrency cold storage wallet is . The youngest "player" in this niche.

And the largest, if we talk about the dimensions of the wallet. So it’s far from a fact that this device can fit in your pocket. Unlike Ledger Nano S or TREZOR.

It is almost no different from its two competitors. PIN codes are also used here, there is a seed. In addition, each transaction must be confirmed via the screen. Number of supported currencies: 6. Initially this wallet cost $239, now it costs $99.

Wallet characteristics table

	Ledger Nano S
What is in the box?	USB cable; Instructions;	Micro USB cable; Instructions;	USB cable; Instructions
Dimensions	98 x 18 x 9 mm, weight 16.2 grams	60 x 30 x 6 mm, weight 12 grams	38 x 93 x 12.2 mm, weight 54 grams
Display and buttons
Compatibility
Cryptocurrencies	Ethereum Classic; ERC 20 tokens.	Ethereum Classic; ERC 20 tokens.
Wallet support

Disadvantages of Cold Wallets

Devices for cold storage of cryptocurrencies are very reliable. But they have their drawbacks. For example, you may forget your seed or PIN, or lose the piece of paper with them. In this case, you will lose access to your funds.

Not everyone is ready to spend from 60 to 100 dollars on a device for storing cryptocurrencies. Moreover, in the future, craftsmen may find ways to hack them. But as the proverb says: “If you are afraid of wolves, do not go into the forest.”

Where and what to buy?

Choosing a wallet is an individual matter. KeepKey and TREZOR are a little more expensive, since they are essentially mini-computers and can partially be used autonomously. Ledger Nano S works exclusively in tandem with a phone or computer. But in terms of the number of supported currencies and the degree of protection, it is not inferior, and in some places even surpasses its competitors. Plus it costs less.

Each of the devices can be purchased on official websites. Moreover, we strongly do not recommend buying them in dubious places - only in the official store!

By the way, on our Telegram channel we not only talk about the situation on the cryptocurrency market and the most important events, but also review new, interesting and promising coins. So come visit and feel at home.

Friends, in this article we will discuss the issues of choice, possibilities, and features of storing cryptocurrency using hardware and local cryptocurrency wallets. These areas can be roughly classified as cold storage of coins, that is, without access to the Internet.

Cold wallets are gaining more and more popularity because with the rapid increase in the value of digital coins, online services are increasingly subject to hacking attempts and theft of user funds. It makes sense that a cryptocurrency wallet on your computer or removable storage for digital assets would be more attractive due to its high level of security.

In the meantime, let's get acquainted with the most popular services and providers of cryptocurrency cold storage services.

How to create a cryptocurrency wallet – types, selection and registration issues

Before discussing the question of how to create a reliable wallet for storing cryptocurrency, it is worth considering that there are several types of cold wallets.

Hardware wallets are removable devices for storing cryptocurrency, while local wallets are software applications that are installed on your PC or mobile device.

Let's find out what problems these wallets solve, how they differ and what capabilities they have.

Hardware wallet for cryptocurrency

A hardware wallet for cryptocurrency solves the issues of convenient and safe storage of cryptocurrency: it is a compact removable storage device that looks similar to a flash drive. This type is a highly reliable tool because it is a local storage medium. The disadvantages include the high cost, so it is suitable for storing large amounts of cryptocurrency when the cost of purchasing a hardware wallet is reasonable.

You also need to take into account that, in fact, owning a wallet in our country is illegal, since they are classified as encryption devices data and must undergo mandatory certification. On the other hand, cryptocurrency is outside the boundaries of legal regulation, and, accordingly, wallets do not have mandatory certificates. It also follows from this that purchasing a device will take some time: delivery of a quality product from the official manufacturer or its representatives will not be fast.

The first hardware wallets went on sale back in 2013, however, given the low cost of coins and the fairly high price of wallets, they did not arouse much interest.

But the digital coin market has changed significantly since then. The real cryptocurrency boom, caused by the soaring value of digital assets, gave impetus to the development of hardware wallets. Today, almost every investor considers it necessary to have cryptocurrency in their portfolio. And when the volume of digital coins reaches thousands of dollars and above, then spending a couple of hundred to ensure storage security no longer seems like an unreasonable waste of money.

At the moment, there are a wide variety of devices for storing cryptocurrency on the market, but I would like to highlight three hardware wallets that have managed to prove themselves and have gained popularity among users.

Trezor hardware wallet

It was with these devices that the history of the development of hardware wallets began, since they were the first to come to the market. It is worth noting that this device brought considerable profits to its inventors, and despite the fact that the Trezor wallet first went on sale 5 years ago, it continues to be one of the most popular and in demand.

The Trezor hardware wallet is a removable storage device in a metal or plastic case, with a small display and two buttons.

With a fairly low cost of around $100, Trezor offers a high degree of security where access to coins is encrypted and protected
password. There is also functionality and convenience: you can work and sign transactions without connecting to the Internet, Trezor supports popular Bitcoin wallets and cryptocurrency exchanges, and has special software. Among other things, Trezor is a multi-currency cryptocurrency wallet that works with a dozen popular digital coins:

Bitcoin
Bitcoin Cash
Bitcoin Gold
Ethereum
Ethereum Classic
Litecoin
Zcash
ERC-20 tokens
Expanse

Of course, the multi-currency nature of the wallet expands its capabilities and increases its attractiveness for users.

Cold wallet for cryptocurrency KeepKey

A stylish, convenient, inexpensive wallet for cold storage of cryptocurrency, its price today is around $100. By and large, it can be called a modification of Trezor, since the internal filling is a copy of the earlier versions of its fellow competitor.

Externally, the KeepKey is a solid digital screen with an aluminum body, and it’s worth saying that this is not just a tribute to style. The large display adds comfort when conducting transactions; it is convenient to check the recipient’s addresses and view the transaction history. The device supports cryptocurrency wallets and is compatible with the Chrome browser, and the Trezor hardware allows you to rely on the appropriate level of security and functionality.

Coins supported by KeepKey:

Bitcoin
Ethereum
Litecoin
DogeCoin
NameCoin
Testnet

In general, we can say that the KeepKey wallet is a cryptocurrency storage device with proven technical parameters and a stylish design.

Hardware wallets from Ledger

The French company Ledger presents a fairly wide range of hardware wallets for cryptocurrency, which is its competitive advantage over other manufacturers.

The most popular wallet is the Ledger Nano S, which looks virtually no different from a regular flash drive. It has a small display, is made in a metal case, and is controlled through the existing buttons. In terms of functionality and security level, the wallet corresponds to the level of its direct competitors.

A distinctive feature of Ledger Nano S is the ability to update the software, which allows you to regularly expand the list of supported digital coins. This allows users to diversify funds into different cryptocurrencies and use new, promising coins.

The developers also opened the possibility of using software from other wallets. An undoubted advantage is the high level of security: all passwords and transactions in Ledger Nano S are processed by the internal operating system, which has a level of protection corresponding to bank cards.

If you lose your device, you have the opportunity to restore access to your wallet. In addition, Ledger wallet owners can store their coins in an escrow account.

Today, the coins you can work with through the Ledger wallet are quite wide:

Bitcoin
Bitcoin Gold
Bitcoin Cash
Ethereum
Ethereum Classic
Litecoin
Zcash
DogeCoin
Ripple
ViaCoin
Stratis
Komodo
Expanse
Vertcoin
Hcash
Stellar
Digibyte

When updating the software, this list is constantly updated. With all these advantages, it is worth noting the low cost, which is significantly lower than that of other similar devices.

Local cryptocurrency wallet on your computer or mobile device

Local cryptocurrency wallets are special programs installed on your computer or applications for mobile devices. This type is also classified as cold storage of cryptocurrency, although in fact, this classification is quite arbitrary, since one way or another your computer will periodically be connected to the Internet, at least for carrying out operations.

Let's consider wallets that have earned popularity due to the optimal balance of reliability, functionality and high technical parameters.

Electrum Wallet

Electrum is one of the most popular wallets, quite dynamic, constantly updated, offering users new opportunities and increasing potential. Electrum is convenient, functional, offers a full range of operations with cryptocurrency, and has an arsenal of tools that allows for advanced settings. This application is ideal for those who carry out a lot of calculations and who need to know when, to whom, what amount was sent.

This is what your Electrum personal account looks like

The wallet offers convenient features such as sending funds to multiple addresses and built-in support for checks. In the application up to version Electrum 2.x, the import of private keys is available, which allows you to connect third-party addresses and carry out operations with their balance. Imported addresses go to the “Imported” account, their balance can be added to your account or calculated separately. In the latest versions, there is no import of keys, however, using the “Restore Wallet” option, you can create a separate wallet for imported keys, but without the ability to generate new addresses.

It is recommended to download the application only from the official website electrum.org, since the use of third-party resources, including application stores, cannot guarantee the installation of high-quality, safe software.

It is also worth taking care of the safety of your keys - if they are lost or stolen, you will not be able to regain control of your funds.

Exodus Local Wallet

Exodus is a multi-wallet for cryptocurrency that allows you to store and conduct transactions with Bitcoin, Dash, LiteCoin, Dogecoin, Etherium. Stylish and functional local wallet, with a convenient personal account interface:

In the menu we will find functions for sending and receiving funds, customizing the appearance, a built-in converter, and a backup section. By the way, you can create a backup copy of your wallet and send it encrypted to your email using the “email backup” function

The wallet has the functionality of a modern exchange platform, all keys are stored on your computer, there is no need to download a “heavy” blockchain. Exodus offers a fixed commission for transactions and high speed of transactions.

Install the application from the official website exodus.io, you can choose the version according to your operating system. The installation procedure is simple and will take just a few minutes.

Cryptocurrency wallet JAXX

The JAXX wallet supports working with several popular cryptocurrencies; today the application works with Bitcoin, Ethereum, DAO, Dash, Ethereum Classic, Augur, LiteCoin, Zcash, RSK Testnet, their list is regularly updated.

The wallet allows you to quickly switch currencies; in the details of each of them you can see the transaction history, the current address with a convenient function for copying it, and the choice of operations to send or receive funds.

You can download the application on the official website jaxx.io, there is support for the operating systems Windows, Linux, Android, iOS, OS X, you can also integrate the application into Chrome and FireFox browsers as an extension.

Mycelium – mobile wallet for cryptocurrencies

The Mycelium app occupies a leading position in the ranking of mobile wallets for cryptocurrencies. It is convenient and has many useful features, including:

Availability of your own trading platform;
Ability to decrypt backups;
By linking a Coinapult dollar account to your wallet, you can sell and buy cryptocurrency for dollars;
Open multiple accounts;
Leave advertisements for the purchase/sale of coins for other users;
Fix the current value of coins in fiat currencies;
Possibility of integrating the application with a QR code scanner.

The site for securely downloading the application is wallet.mycelium.com.

Electronic wallet for cryptocurrency - how to ensure safe storage of digital coins

First of all, choosing cold electronic wallets for cryptocurrency ensures their high level of security. We are willing to spend money on purchasing hardware wallets to securely store our digital assets.

And yet, taking into account all the advantages of working with cold wallets, you need to remember that not a single, most modern and technologically advanced device cannot give a 100% guarantee of safety if you yourself do not follow the basic rules for safe data storage.

Choose trusted and convenient wallets, use strong passwords, store them correctly, and then your funds will be safe.

I also remind you that you can use part of your cryptocurrency capital to generate your stable passive income. Today, many projects allow you to open deposits in bitcoins and other popular coins: you have the opportunity to invest without converting cryptocurrency into dollars.

I am always ready to help my readers choose worthy projects for investment, completely free of charge, tell them how to properly distribute funds, give advice on choosing the optimal strategy, and create an investment portfolio.

Contacts for contacting me are provided

You can follow the development of projects without leaving the Mixinvestor blog page. Information about profitability statistics, news, and the latest changes in current projects is published in regular investment reports.

Stay with the Mixinvestor blog, read news, reviews and articles, connect to our communities, use the best cryptocurrency wallets and participate in the most interesting and promising investment projects.

And don't forget to share information with your friends:

There are two types of cryptocurrency storage, hot and cold. What is it and what is it for? For those of you who want complete control over the storage of your cryptocurrency, using a hot and cold wallet at the same time is a good option. I have already written about ones that combine both of these functions.

What is hot or cold storage of cryptocurrency?

A “hot” wallet is a cryptocurrency wallet from which funds can be spent at any time. This wallet is constantly connected to the Internet as it maintains an active connection to the network.

A cold wallet is not intended for regular operation, but you can receive cryptocurrency on it at any time. A cold wallet is used for long-term storage of cryptocurrency offline. If the wallet does not have an Internet connection, hackers are therefore unable to steal funds from it. A hot wallet remains vulnerable to attack by criminals, so it is recommended to store the minimum necessary amounts for everyday needs in it. It is important to remember that a cold wallet can be stored on almost any device, even on a piece of paper.

Cryptocurrency wallet on paper

To create a paper wallet, you need to generate a Bitcoin address and secret key offline, and write the keys down on paper. Keep your keys in a safe place, such as a safe or safe deposit box. You can then send bitcoins to your chosen address. To remove them, the private key is imported into the wallet program.
You can increase the security of your money by encrypting your paper wallet - write down the key using a cipher. To read the entry, you need to know the password. Typically the encryption system is BIP38. You can create an encrypted wallet at bitaddress.org.

It is important to remember that if you lose your paper keys, you lose access to your wallet completely.

Conclusion

Simply put, your hot wallet is more like a checking account, while your cold wallet is more like a savings account. The ideal option would be to store most of your bitcoins in a secure cold wallet offline and spend them using a hot wallet.

The prevalence of the Bitcoin cryptocurrency creates the problem of securely storing existing funds in a safe place inaccessible to attackers. For example, the online wallets that are very common today cannot be called safe, because a skilled hacker attack can leave your storage completely empty. That is why, recently, a separate method of saving funds has become increasingly widespread, when the bulk of savings is placed in a cold wallet.

What is Cryptocurrency Cold Storage?

There are two options for storing cryptocurrencies. Depending on the organization of the process, it will be:

The hot method (hot storage/wallet) is traditional online wallets. A constant connection to the Internet and the blockchain network makes it possible to spend funds, but this also makes them vulnerable to hacker attacks.
Cold method (cold storage/wallet) – implies the presence of a private key, which is stored offline and used to withdraw from a public address. An additional security measure is the one-time use of a Bitcoin cold storage wallet - if money is withdrawn from it once, it is considered that it has “lit up” on the network.

Why you shouldn’t store all your cryptocurrency on an exchange or web wallet

The main reason why there is no need to keep a large amount of virtual money on the exchange is the possibility of being harmed by hackers. The most common method is to steal keys from inexperienced users - as a result, people are completely deprived of cryptocurrency from their balance. At the same time, the theft of funds stored on a crypto exchange is not the only reason for looking for another place to store large sums. Recently, account blocking has become more frequent, which deprives users of the opportunity to use cryptocurrencies stored on the Bitcoin exchange.

How cold wallet works

The operating principle of cold wallet is to store data offline without an Internet connection, and therefore without vulnerability to hacker attacks. There are many options for implementing this method, for example, a code written on paper, a physical coin, a metal token, or a USB drive. When providing offline data storage, you must also ensure that your information is protected during physical storage - it is in a place inaccessible to unauthorized persons, but has a backup copy in case of damage or loss of the main storage device.

The autonomous nature also applies to the creation of the Bitcoin storage itself. Before generating a wallet using a special service (bitaddress, etc.), the computer’s Internet connection is turned off. To be fair, it is worth noting that there is also an option for online generation, but the security of storing cryptocurrency in this case will be much less. At the output the user receives:

Bitcoin address (public key) – crypto wallet number and QR code; this information is not secret and is used in open sources, for example, when indicating for the transfer of funds.
Private key (private key) – a personal key that will become a paper wallet if you write the number on a piece of paper with a pen in legible handwriting or print out the access code on a printer. This information should be stored with all possible precautions (even investing it in a safe deposit box), because in the event of theft, an attacker can easily take possession of your savings.

Distinctive features

Although cold and hot storage methods have similar objectives in preserving cryptocurrency content, they are very different from each other. Basic differences include:

Implementation – a cold storage Bitcoin wallet often involves a physical embodiment (a piece of paper with a written number, a USB flash drive, etc.), while a hot storage is virtual and located on the Internet.
Precautionary measures - compliance with cryptosecurity rules for a specific hot wallet implies protection from third-party penetration during hacker attacks and other Internet contacts. For a cold wallet, it is much more important to store it in a safe place, where it cannot be found by attackers who could use the received data.
Availability and speed - thanks to its location on the currency exchange, the online wallet is available for transactions 24 hours a day and from any computer. On the one hand, this can be called an advantage that increases ease of use, but on the other hand, this makes hot storage dangerous for storage. Actions with cryptocurrency during offline storage are not so efficient, but they are highly secure.

How to use it correctly

In general, a cold cryptocurrency wallet can be represented as a program, device or device that stores information about the user’s private keys for accessing the blockchain network. The basic rules ensuring the safety of using such storage facilities are:

Selecting the right type of Bitcoin storage to use (hardware, local, paper) depending on the tasks of a particular user.
Correct registration in the blockchain network, eliminating the possibility of exposing/compromising a specific Bitcoin address.
Restricting access of unauthorized persons to cryptocurrency storage facilities (software and physical media).

Bitcoin cold storage methods

There are different types of cold wallet for storing cryptocurrency safely. There are the following types of Bitcoin storages:

Local – otherwise they are called software, because special software is located on a specific computer (one of the most popular crypto wallets is Bitcoin Core, but setting it up requires skills in using the console). Depending on whether the entire blockchain chain is downloaded or only the information necessary for work, there are thick and thin local web wallets. Due to the larger volume of digital data that needs to be downloaded and processed, thick crypto storages are not as fast as thin ones, but they are more reliable.
Mobile – designed for use on smartphones. The most user-friendly operating system for such applications is Android; as for iOS, they are developing very slowly in this direction.
Hardware - are devices that are similar in shape and size to regular USB flash drives. A separate device for storing secret codes increases the security of the device, for example, a trezor cold wallet even in the event of loss, allowing the owner’s access to cryptocurrency to be restored.
Paper – a personal key written on a piece of paper or a printed QR code. But you should not take the name of this storage literally, because in addition to paper, the necessary verification information can be applied to another, waterproof and more damage-resistant material - plastic or metal.

Bitcoin paper wallet

Crypto wallets of this type have become widespread due to the fact that they significantly increase the security of your crypto savings using quick and simple methods. A paper bitcoin cold storage wallet is a collection of two keys – public and secret. It is necessary to ensure that the secret key is stored securely, but do not forget that if you lose it, you will also lose access to your crypto savings. Such crypto storage happens:

Normal - both keys are ready for use.
Encrypted – the secret key is encrypted on the client side (the bip38 algorithm is very common), so it can only be recovered if you know the password.

How to create

Creating a Bitcoin cold storage wallet is not difficult and can be done even by novice cryptocurrency users. The software can be found on specialized sites (for example, WalletGenerator.net) - it is open source software that can be checked for viruses, etc. The sequence of actions to create a key will be as follows:

You need to run an antivirus and make sure that your computer does not contain malware.
Then you need to go to WalletGenerator.net and download the zip archive of the wallet generator to your computer.
The next steps are to disconnect your computer from the network, extract the contents of the archive and click on the index.html file.
The program generates a sequence of random numbers by reading the movements of the cursor, so you will need to move it around the screen. An alternative would be to manually enter a combination of characters into a special field - when the required amount of data is collected, the program will warn you about this. Crypto wallet creation is complete!
You will see a public and private key on the screen - write down the secret combination on a piece of paper, including characters from different registers, and print the QR code (for reliability, make 1-2 physical copies, in case of a fire or other force majeure event).
Close the tab you are using. After this, you need to restart the connection and connect the computer to the Internet again.

Why are private and public keys needed?

The private key can be stored in clear text - it is simply an address to which money can be transferred to you. But special attention should be paid to the safety of the secret crypto key - with its help you can access your storage and take advantage of your savings. There are several dangers that threaten the private key:

Unreliable storage – no matter how many copies of the key you make, if even one copy falls into the hands of an attacker, he will gain access to the stored cryptocurrency.
Poor quality printing - deformation, shedding or spreading of the ink layer due to water ingress will lead to the fact that the QR code cannot be scanned to gain access to crypto funds.
Mechanical damage – paper is not a durable medium, so you need to take additional safety precautions. You can use a more durable medium or laminate it.

Pros and cons of a paper wallet

Cold storage paper Bitcoin wallet is very popular among cryptocurrency users. Its advantages include:

ease of generation;
ease of copying;
no additional costs for creation.

But there are also disadvantages and they need to be taken into account in order not to create problems for yourself when using crypto storage. The disadvantages include:

fragility, low strength, ease of damage and destruction;
the need to find a reliable place for storage;
ease of use by attackers.

Offline transaction signing method

This method is highly reliable, but its use requires additional equipment - an offline computer on which a crypto wallet with a digital signature function will be located. On a computer connected to the Internet where the hot wallet is installed, a transaction is formed - it is transferred to an additional computer, signed digitally and returned back to the equipment connected to the network. By using a laptop as a second device, you can significantly increase your mobility by always having a secret key at the ready.

Using the offline transaction signing method, the user does not need to transform a cold crypto wallet into a hot one, but he needs to pay attention to the functionality of the storage itself. Considering the specifics of performing this task, cryptocurrency experts recommend using Electrum or Armory Bitcoin Client as wallets (the advantages of the latter include open source, so it is possible to check the “sources” of this software).

Transaction execution mechanism

Performing an offline transaction signature is not difficult, provided the entire process is prepared. In general it looks like this:

You need two computers - one of them is connected to the Internet and has a hot crypto wallet installed on it, the other is disconnected from the network and contains software to sign transactions.
A transaction is formed on an online computer in an electronic crypto-wallet with an additional step - authorization using a digital signature.
The created transaction should be exported to an offline computer.
The transferred transaction is supplemented with a digital signature using wallet programs (Armory Bitcoin Client, Electrum, etc.).
The signed transaction file is imported back to the first computer to complete the transaction.

Advantages of the method

The offline transaction method makes the circulation of your crypto funds much safer. The undoubted advantages of this method include:

a simple form of implementation if you have the necessary equipment (a second offline computer);
high security of transactions due to the exclusion of contact with the Internet for the secret key;
the ability to safely use hot storage without converting it to cold status.

Bitcoin Wallet with fragmented private key

Bitcoin technology, called "Secret sharing", offers an interesting way to increase security. The private key is divided into separate fragments that will be controlled by individual people who store it in geographically separate places. At the same time, the key is considered sufficient to carry out a transaction if it is possible to collect m-necessary parts from n-existing ones. M- and n-parameters are set in advance, for example, a crypto password can be divided into 7 fragments, and for verification it will be necessary to put 4 parts together.

There are many algorithms for cryptographic protocols that implement secret sharing in practice (for example, Shamir’s scheme), with the help of which it is easy to establish the number of parts of splitting the original cryptokey and the minimum for its recovery. The benefits of a fragmented private key include:

The ability to share a crypto key in a group of people, where the decision is made by a certain number of team members - for example, a password can be divided between the founders of a company to eliminate the risk of abuse by a single participant who owns the secret key.
An alternative to classic copying with the sole use of a password is a much more reliable method, because even if a single fragment falls into the wrong hands, access to cryptocurrencies will not occur.

But there are also disadvantages - they relate rather to the organizational component. These disadvantages include:

When used in groups, there is the possibility of hidden collusion between several owners of individual fragments, to the detriment of other participants.
When used individually, the loss of a large number of parts precludes the possibility of recovering the crypto password.

USB crypto wallet for cold storage btc

A cold btc wallet in the form of a USB drive involves the use of a flash drive or portable hard drive. The sequence of actions when preparing a crypto storage, in this case, looks like this:

Using special sites, cold storage is created on an offline computer (the process is similar to creating a paper wallet, where you need to fill out the necessary data in a special form).
The secret key (or the wallet.dat file, backup information and other recovery information) is written to a USB drive. An option for creating a highly secure key would be to write a password-protected pdf document with a crypto wallet number and a QR code. If you scan this code, access to the storage will be open.
To store the media, you need to determine a safe place that is inaccessible to unauthorized persons and protected from natural damage.

Using a USB drive in the form of cold storage is suitable for users who are concerned about the safety of their funds. The advantages of this method include:

availability of USB flash drives;
prompt access to necessary information;
compactness.

But there are also negative sides to using this method. The disadvantages of using a flash drive or external hard drive include:

possibility of mechanical damage;
danger of computer viruses;
the harmful effects of strong magnetic fields on stored information.

Hardware cold wallet

The principle of operation of hardware storage is similar to the operation of a second (not connected to the Internet) computer in the offline signature method. In this case, all functional tools are collected in a compact device, and the transaction is signed by pressing a button. A hardware wallet is the same size as or slightly larger than a flash drive, making it very convenient to carry with you for regular transactions on third-party computers. Effective payment protection is complemented by authorization using a PIN code, so an unauthorized person will not be able to complete the transaction.

Cold multi-currency wallets are well suited for those whose business involves using various types of cryptocurrencies (not only Bitcoin, but also Ripple, Dash, Ethereum, etc.). The small device hides the means for secure operations with crypto-accumulations:

Model name: Ledger Nano S;
price: from 9,700 rubles;
description: a device for cold storage of crypto savings, suitable for different types of currencies and compatible with popular operating systems (Windows, etc.);
pros: compactness, modern look;
Cons: Due to its small size and lack of a clip, this gadget is easy to lose.

Combining a small size and good security, a hardware-type crypto wallet provides the ability to quickly make a large number of payments. In this capacity, its use is not much different from a regular wallet for rubles and dollars:

model name: Trezor;
price: from 9,500 rubles;
description: designed to work with different types of cryptocurrencies, has a multi-level security system;
pros: proven model;
cons: difficult to find in retail.

The specificity of the crypto hardware wallet market is that many models are difficult to find in computer stores. Much more often they are purchased individually on foreign auction sites and sold via the Internet:

model name: KeepKey;
price: from 11,000 rubles;
description: compatibility with different names of cryptocurrencies and operating systems,
advantages: high efficiency of protection of crypto operations;
cons: the size of a small box, larger than previous models.

Rating of the best wallets for cold storage of bitcoins

To choose the right wallet, consider how suitable it is for your situation. Considering the variety of tasks that cryptocurrency owners have, it is impossible to talk about a clear priority of any model or type. For example, a paper storage facility will be convenient for those who want to store bitcoins for a long time, but the same crypto wallet will be inconvenient if you need to make daily payments. Different types of crypto storage:

Name		Operating principle/characteristics	Possibility of cold storage by cryptocurrency types
	Mobile crypto wallet	Implementing cold storage using a mobile device
		Integration with a smartphone for secure storage of cryptocurrencies
		Features of a secure Bitcoin wallet on a mobile device	Yes (Ethreum support)
	Offline transaction signature method	In order to put a digital signature, a special computer is allocated - it is not connected to the Internet and is free from attacks.
	Local	Thin-type Bitcoin software wallet installed on a computer
	Local	Thin Bitcoin storage with a user-friendly interface
	Browser wallet	Internet browser integration for creating secure cryptocurrency transactions
	Hardware crypto wallet	Connection via USB connector, the principle of operation is similar to offline transaction signature, only the second computer replaces a special device
		The hardware of the device does not interact directly with the Internet, and has several levels of protection for secure payments.
		USB connection, compatibility with different operating systems, multi-level access protection system
		Interaction with a computer via USB, offline approval of transactions