A type of digital wallet that stores the user’s address and private key. It is similar to the key or password which unlocks safe boxes keeping private cryptocurrencies.
What is Cold Wallet?
Cold wallet is a wallet that is not connected to the internet. Users must be responsible for their own private keys.
What types of Cold wallets are there?
- Paper wallet
A paper wallet is a type of cold wallet which is in the form of a paper which has public keys and private keys information such as a Bitcoin paper wallet etc.
- Hardware wallet
Hardware wallets are typically a USB drive device that keeps the user’s private key. Moreover, it connects to software on computers or mobile devices. Examples include Trezor Model T wallet, Ledger Nano S wallet etc.
Cold wallet advantages
High security; it is unlikely to be hacked as private keys never come to connect with a user’s computer network.
- Ability to back up whole digital assets in hardware wallet
- Multi signatures to protect the wallet from hackers. An approval for a transaction has to be approved by a number of people.
Cold wallet disadvantages
- The complexity of use : users need to print information on paper then input data to computer or mobile phone when it is needed.
- It can easily get lost and if lost, all digital assets will be lost forever.
- Hardware wallets are more expensive than other wallets (Ledger Nano X price ranges from around $30 to $3,000)
- Can lose hardware wallet and private keys will be lost forever.
- A hardware’s service life is short.