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What Is Cold Storage For Cryptocurrency?

By October 27, 2020May 9th, 20234 minute read

In the generic sense, cold storage refers to a place where we can preserve things over a prolonged time span. In the world of cryptocurrency, a cold wallet offers investors a means of preserving their digital assets over a long-term in a secure manner. You can think of cold storage to be the digital means of storing gold in a virtually impenetrable safe with proper security measures. Today, we are going to elucidate this tricky concept of crypto cold storage and the best available options, so that you can buy cryptocurrency in India and store your coins with maximum safety. 

Cryptocurrency is stored offline in cold storage. Every crypto wallet has a private and public key be it for Bitcoin or other crypto coins. Public key refers to the address which people use for sending the coins. The private key provides you with access to the coins for withdrawing and spending them at will. Cold storage keeps your cryptos protected from the attack of hackers or other malware by making it inaccessible by the internet. If a thief tries stealing the hardware, then you can prevent him from accessing your funds by setting a PIN code. You can even get your funds back by using a backup code or recovery phrase, even if it falls in the wrong hands.

The cryptos can be transferred to your cold wallet without an internet connection. You can hide the cold wallet in a secure location like a bank deposit box. Now that you have understood the basics of cold storage, let us take a look at the different types of cold storage to buy bitcoin in India and store all your cryptos:

Paper Wallet

These are documents containing a public crypto address and a private key for receiving and spending Bitcoins or Altcoins. You can print these codes in the form of QR codes on paper and scan the same for executing the transactions. Different paper wallet service providers allow the creation of random crypto addresses, each having its exclusive private keys. Certain paper wallet providers offer tamper-proof designs for strengthening the security meter. The offline nature of the paper wallets makes them completely safeguarded from malware, viruses, and hacks.

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In spite of all these advantages, you need to check the paper wallet for any spyware which can break into your computer’s security threshold. After setting up the paper wallet, you need to ensure that the website code can be run in offline mode as this will allow you to generate the keys even after disconnecting from the internet. Once the paper has been printed, you can place it in a sealed plastic folder, laminate it, or store it safely in a bank vault. It is imperative to note here, that paper wallets are not well-suited for transmitting funds partially. For transferring or spending partial funds, the private key of your paper wallet shall have to be imported into a desktop wallet. Doing this empties your paper wallet and prohibits further usage.

Hardware Wallet

You can store your crypto keys in these physical and electronic devices without any internet connection. A random number generator is used by the hardware wallets for generating both private and public keys for the hardware wallets. The biggest advantage of hardware wallets is definitely the robust level of security as it doesn’t rely on an internet connection. This keeps your Altcoin funds and Bitcoin assets safeguarded from viruses and other online threats. You can also keep your funds buffered from malicious hackers by setting a PIN code. If the hardware wallet falls in the wrong hands, you can still retrieve the funds by creating a recovery phrase or backup code in advance. 

Hardware wallets are the perfect choice for people who wish to keep their digital assets secure without having to deal with the nitty-gritty of a crypto trading software. Certain cryptocurrency exchanges allow connecting the hardware wallet to a trading platform for adding an extra layer of security to your transactions. It’s best to purchase a cryptocurrency hardware wallet from a competent and trustworthy manufacturer for keeping your funds secure. You can take your pick amongst the four popular hardware wallet options of Ledger Nano X, Ledger Nano S, Cobovault, Trezor, etc. Most of these hardware wallets have huge demand which leads to a waiting period of around two months.

While most hardware cold wallets can be availed for less than $100, you can also opt for the pricier models. Security features of all the models are more or less the same. However, the pricier ones might come with a touchscreen interface and Bluetooth for greater ease of use. Multiple crypto wallets like Bitcoin, Ethereum, Cardano, XRP, and NEO can be hosted in a hardware wallet. It takes just a few seconds to install a new wallet on your hardware device which comes in as a substantial improvement over its software cold storage peers, wherein you need to create a new wallet for every coin.

Desktop Wallets

They are installable software packs that are compatible with common desktop operating systems like Windows, Mac, and Linux. However, desktop or laptops are often connected to the internet and thus you need to adhere to stringent security measures like a strong firewall, anti-malware software, and antivirus. Some popular desktop wallets for storing your cryptocurrencies are Bitcoin Core, Exodus, Jaxx’s Chrome Extension, and Electrum.

USB Drive

One of the easiest means of cold storing crypto coins is by using a USB drive which allows the export of private keys. However, this method is not very secure as your digital assets can be accessed by anyone having access to your USB drives.

Final Words

Crypto experts and Bitcoin investors heavily promote the usage of cold wallets given their top-notch security attributes. Since they are not connected to the Internet, all chances of virus, hacking, and malware threats also get marginalized.

Frequently Asked Questions

How Safe Are Cryptocurrencies?

Cryptocurrencies can be safe, but your crypto wallets can be hacked if proper security steps are not performed.There are also dangers and uncertainties associated with investments, and we cannot declare any virtual currency investment risk-free. Buying and selling cryptocurrencies does not have to be dangerous if the trader is well-versed in the market and treats his coins with care.

How To Invest In Cryptocurrency?

There are two ways of investing in cryptocurrency, mining and via exchanges. Cryptocurrency mining is considered the procedure of verifying and adding transactions to the blockchain public ledger. Another option is via cryptocurrency exchanges. Exchanges generate money by collecting transaction fees, but there are alternative websites where you can interact directly with other users who want to trade cryptocurrencies.

How To Invest In Cryptocurrency In India?

There are two ways of investing in cryptocurrency, mining and via exchanges. Cryptocurrency mining is the process of verifying and adding transactions between users to the blockchain public ledger. Purchasing cryptocurrency in India is a straightforward procedure where investors simply participate by registering with a crypto exchange such as WazirX. After registering for an account, citizens can trade multiple cryptocurrencies, store cryptocurrency in wallets, and more.

Is Cryptocurrency Safe To Invest In?

Cryptocurrency investments are subject to market risks, but if sufficient security measures are not taken, trading accounts can be maliciously accessed. Investments come with risks and uncertainties, and we cannot claim that any digital currency investment is risk-free. Buying and selling cryptocurrencies can be risky even if the trader is knowledgeable about the market and treats their coins carefully.

Is Cryptocurrency Banned In India?

No, cryptocurrency is not banned in India. India has seen its ups and downs in the crypto sector concerning its legal status. The Reserve Bank of India (RBI) issued a circular in April 2018 advising all organizations under its jurisdiction not to trade in virtual currencies or provide services to assist anyone in dealing with or settling them. A government committee proposed outlawing all private cryptocurrencies in mid-2019, with up to ten years in prison and severe penalties for anyone dealing in digital currency. The Supreme Court overruled the RBI's circular in March 2020, allowing banks to undertake cryptocurrency transactions from dealers and exchanges.

What Is Cryptocurrency?

A cryptocurrency is a digital currency secured by encryption, due to which chances of activities such as counterfeiting and double-spending taking place get close to impossible. Cryptocurrencies get created on blockchain technology ( a distributed ledger enforced by a distributed network of computers). Cryptocurrencies are unique in that they do not get issued by any central authority. The term "cryptocurrency" comes from the encryption techniques used to keep digital currencies and the network safe.

Is Mining Cryptocurrency Legal?

Cryptocurrency mining can be time-consuming, expensive, and sporadically profitable. Mining has an appeal for many cryptocurrency enthusiasts as miners are paid directly with crypto tokens for their efforts. The legality of cryptocurrency mining is dependent on where you live. In India, there is no restriction on crypto mining.

What Is The Safest Cryptocurrency To Invest In?

Bitcoin has had the highest market capitalization, has been around the longest, has the most experienced development team, and has enormous network impact and brand recognition. As a result, while trading cryptocurrencies, the rate of return on Bitcoin is commonly used as a benchmark. However, the risks associated with cryptocurrencies remain, and the safest cryptocurrency for you depends on your analysis.

What Is The Meaning Of Crypto?

A cryptocurrency is a digital currency that is secured by the process of cryptography, making counterfeiting and double-spending almost impossible to happen. Blockchain technology is used to produce cryptocurrencies ( a distributed ledger enforced by a distributed network of computers). Cryptocurrencies are distinct in that a centralized authority does not issue them.

Are Cryptocurrencies Legal In India?

In India, cryptocurrency is legal, and anyone can buy, sell, and trade it. Because India lacks a regulatory system to regulate its operations, it is presently uncontrolled. According to the Ministry of Corporate Affairs, companies must now document their crypto trading/investments inside the financial year.

Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
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