Cold Storage for Bitcoin
In the realm of cryptocurrencies, cold storage of Bitcoin or any coin refers to storage of the currency on offline hardware assets. Cold storage of bitcoins is primarily done for security reasons as storage on a network or online wallets can open it up to cyber threats.
Storing Bitcoin in exchanges is also risky without cold storage as these exchanges offer an instant withdrawal feature, and the limit usually is in hundreds of thousands. In order to keep the coins safe from attackers, a lot of exchanges and websites store the bulk of their clients’ cryptocurrencies in cold storage on offline data storage facilities. The cryptos in cold storage are not present on any other computer systems or networks. The entire reserve of one’s cryptocurrency does not come under threat as long as cold storage facilities are used. Some of the various cold storage methods include:
- Portable cold storage wallets such as USB drives or other kinds of data storage devices located in safe facilities.
- Paper wallets (although this physical method has a lot of downsides and has become quite unpopular now).
- Converting into bearer items or tokens such as physical Bitcoin (physical Bitcoin wallets are a novelty item that can be used to store Bitcoins securely).
- Using an offline Bitcoin hardware wallet.
While there are issues with cold storage, they can be easily solved. Most people who go for cold storage have a variety of reasons for choosing this option. Some of the various reasons for choosing cold storage over other methods of storing Bitcoin are mentioned below:
- When one needs to store a large sum of Bitcoin in a secure location.
- When the stored Bitcoins do not need to be accessed repeatedly.
- When the owner wishes to protect their coins themselves without relying on any third-party services.
- When privacy is of utmost importance.
- When one can pay for the hardware required for cold storage.
Depending upon the method chosen, there are various ways of storing Bitcoin in cold storage. Most USB drives and other hardware come with easy-to-follow instructions that guide the users on how to transfer their Bitcoin into the wallets. Such cold storages are far more trustworthy when it comes to keeping Bitcoins safe from hackers. It is often recommended to use both kinds of wallets together, online wallets for regular transactions and cold storage for the safekeeping of the main crypto reserve.
Gustavo Fonseca loves anything digital and crypto-related which makes him sit up and pay attention. He got into the world of digital marketing and business digital transformation career in 2010. Some time later he got into Crypto, a dynamically developing segment at the intersection of the financial services and technology. Gustavo joined TheDailyCoins in September 2018.