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The cryptocurrency storage consists of two hashed data arrays – a public address and a private key. It is much more secure to store this information on a physical medium without an Internet connection than in online services. The first cold wallet for bitcoin was a desktop program that required a blockchain downloaded to a computer to work. Since the launch of Bitcoin, there have been many ways to interact with coins, which we will cover in this article.
What is cryptocurrency cold storage
Physically, no one can own digital assets, because they are in the blockchain in the form of records. The only method of identifying the owner on the network is his private key. The safety of all means depends on where it is located.
Differences between cold and hot storage
Online wallets are easy to use – they are easy to get and replenish. However, their disadvantage is the vulnerability of platforms. All confidential user information is stored on the servers of the operators, so fraudsters can gain access to these files and, accordingly, to the funds.
In cold storage, the owner is responsible for the security of his private keys. It controls the media they are on.
Principle of operation
A cryptocurrency wallet is a software in the form of desktop and mobile applications or a web interface where you can store and move digital assets. A set of two keys is used to identify transactions:
- Public – to receive cryptocurrency.
- Private — for signing transfers.
Advantages and disadvantages
What matters is not where the cold bitcoin wallet is created, but how the private key is stored. There are many wallets on the market that have their own strengths and weaknesses.
Pros:
- Most of the time, files are stored offline, which reduces the risk of being hacked.
- The owner controls the safety of confidential data.
Minuses:
- It is possible to lose data due to a physical media failure.
- Needs constant backup to avoid account access problems.
Varieties of cold bitcoin wallets
Since the advent of Bitcoin, many vaults have appeared on the market. They differ both in characteristics and in access methods. The user can choose the option that suits him according to the set of functions, interface, and degree of security. By the way, today bitcoin wallets can be used to pay for various services on the Internet, for example, when you play in an online casino or place bets at bookmakers. A wide variety of games can be found at CasinoChan.
Hardware Wallet
This is a USB flash drive. Private files are created inside a secure environment. It is considered a secure way to interact with digital assets due to the use of hack-resistant cryptography.
Paper wallet
This is a printed sheet with public and private keys, which are available only to the owner. The advantage of this method is complete autonomy without an Internet connection. Data is easily copied. Duplicates can be stored in different places to reduce the risk of losing access to assets due to mechanical damage to the paper wallet.
Desktop wallets
These are repositories in the form of software installed on the user’s PC. They are of two types:
- “Thick” – you need to download the entire blockchain to your hard drive and synchronize. This requires over 500 gigabytes of free space.
- “Thin” – no need to download the entire registry. The program runs faster.
Removable drives
As a cold Bitcoin wallet, you can use a regular USB flash drive or portable hard drive. After installing the program on a PC, all files necessary to identify the owner are transferred to external devices. Without connecting to a computer, it will not be possible to sign a transaction to send cryptocurrency.
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