Ask CryptoVantage: How Safe is “Cold” Storage?

Cold Storage Offers Exceptional Security

If recent events have taught us anything, it must be that our hard-earned crypto coins are not safe when stored on an exchange. Remember the saying “not your keys, not your coins?” It is not a new lesson.

Cold storage wallets like the Ledger Nano S Plus or the Trezor Model-T on the other hand offer excellent security and are considered to be the most secure of all wallets. They look similar to a USB drive and combine the user-friendliness of a digital interface with the security of an offline device. Compare it to having an in-home bank safe where you keep your valuables.

Unlike software wallets, cold storage wallets are developed in such a way that you never have to trust software on your mobile device to hold your private keys. By design, cold storage wallets prevent your private keys from ever leaving your device.

Another great reason to use cold storage is the fact that it teaches you to be self-reliant when it comes to your crypto coins. Bitcoin, for example, was created as a peer-to-peer currency that doesn’t require third-party middlemen like governments, banks or other institutions.

So, when you use a cold storage wallet you are effectively becoming your own bank. It may not be necessarily for everyone but it can be comforting and empowering to know you have complete control over your own crypto assets.

Of course, you don’t need to own a hardware wallet to buy, store, or send crypto, but we still highly recommend it because it will significantly improve security by reducing the risk of your crypto being stolen. Either by hackers or crypto exchange CEOs and their cronies. Here’s a closer look a some of the best hardware wallets.

What Are the Drawbacks of Cold Storage?

Fortunately, there are not too many drawbacks to using cold storage as a solution to keeping your crypto safe. Perhaps, the only real drawback of cold storage is that your assets are less liquid and therefore harder to trade quickly. However, unless you are a day trader, this should not be an issue.

Some other minor drawbacks could be the fact that it may take some time to figure out how your cold storage wallet works. Especially for new crypto users, this can prove to be a daunting task. Just remember, security always trumps convenience. Finally there is the drawback that hardware wallets cost money so there is an initial investment required.

Of course, if you would choose to use a paper wallet, which is also considered to be a cold storage solution, the daunting learning curve would not be a deterrent at all. Water damage and fire might be though.

Conclusion: Hardware Wallets Are the Gold Standard in Crypto Security

Although most cold storage solutions are slightly more cumbersome than software wallets, they are also much more secure. It is also very unlikely for a cold wallet to be hacked. Even if hackers would somehow be able to get their hands on your physical device, they would still have to guess your secret pin code. After three failed attempts your device would reset to factory settings.

At the end of the day, it is your sole responsibility to keep your crypto coins safe. So, invest in a hardware wallet, get your crypto off exchanges and into cold storage.

Remember, the recent collapse of Sam Bankman-Fried’s FTX and his alleged criminal shenanigans are just the latest reminders that self-custody and cold storage are the safest methods you have to keep control of your private keys and therefore your crypto coins.

Without a doubt, more reminders will come and rob crypto investors’ fortunes. But not yours, because your fortune will be safely stored in a cold storage wallet.