How to protect a cold wallet

By Kluma | InterestingCrypto | 19 Jul 2020


Over the past few years, decentralization and anonymity have brought cryptocurrencies incredible popularity.

However, Thomas Lee, a lecturer in the basics of cryptocurrency under the nickname Tvle , believes that "in recent years, the number of threats and fraudsters in the cryptocurrency world is constantly growing, which undermines the stability of digital assets."

What is a cold wallet ?

Cold storage is the storage of cryptocurrencies in the physical world. This method reduces the risk of online hacker attack or theft.

The cold wallet does not need an internet connection and the private keys are stored offline, which reduces the likelihood of unauthorized access.

Cryptocurrency users need physical access to the cold wallet Bitcoin - a safer alternative currency online storage - on exchanges Bitcoin and other digital currencies.

Types of cold storage wallets

Cold wallets allow you to store digital currencies and private keys on physical devices without an internet connection, such as USB drives.

This storage method protects against hackers trying to steal private keys.

Popular cold wallets:

  • Model T Trezor . Provides a high level of security thanks to the PIN code. During installation, a 12-word phrase is generated to restore the wallet. Trezor Model T supports the following cryptocurrencies: Bitcoin, Litecoin, Ethereum and ERC 20 tokens, Bitcoin Cash, Bitcoin Gold, Namecoin and Dogecoin.
  • Nano S Ledger . Like the Trezor, the Ledger Nano S requires a PIN. It also generates a recovery phrase during installation. Private keys are stored in the hardware, and to access them you need to connect your device to your computer and enter your PIN. Ledger Nano S creates full wallet backups in case the device is lost. It supports multiple cryptocurrencies. Users have to physically press a button to confirm and execute transactions, further enhancing the security of the wallet.
  • KeepKey . An easy-to-use cold wallet that requires a computer connection. It uses a random number system and a PIN to protect against malware. The recovery phrase for creating a wallet backup is 18-24 characters long. KeepKey wallet supports a few cryptocurrencies, including Bitcoin, Bitcoin Cash, Ethereum, Litecoin, Namecoin, and Dogecoin.

Basic ways to protect a cold wallet

Here are some tips on how to keep cold wallets and private keys safe.

  • Use complex passwords

The first step to securing your Bitcoin wallet is to have strong passwords on your devices. Password complexity is the foundation of digital asset security.

Simple passwords open the door for hackers to crack. You should back up or write down passwords on paper and store them in a safe place away from prying eyes.

  • Wallet encryption

It is difficult to store cryptocurrency offline without sufficient protection. Therefore, you need to use encryption to protect your wallet PINs and passwords. It will protect your wallet from cybercriminals trying to steal cryptocurrency.

  • Back up your wallet regularly

Regular backups are great cryptocurrency protection in case your device gets lost or broken. With the help of a backup, you can restore wallet data.

It is recommended to store backups in several places - this increases the chance of restoring information about the wallet if suddenly the paper wallet gets lost or becomes unusable.

  • Use multisignature

If a cold bitcoin wallet is compromised, then multisig will prevent hackers from gaining access to it.

The hardware wallet is highly secured as it has one owner. The currency can be accessed only after all signatures have been verified.

  • Store your recovery phrase in a safe place

The recovery phrase, or mnemonic phrase, allows, in the event of a device breakdown, to restore the information necessary to access the cold wallet.

The recovery phrase should be written down on paper and kept in a safe place. If the device breaks down, using the phrase, you can restore the wallet and return the digital currency.

 

Conclusion

Storing digital assets online increases the risk of scam and theft, even if you use custody services of third parties.

Fraudsters and attackers defraud owners of hard-earned cryptocurrencies using phishing attacks, fake wallets, and illegal cryptocurrency schemes - to name just a few.

To ensure the security of a cryptocurrency cold wallet, you need to protect funds from unauthorized access.

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