Investing in cryptocurrency is a wild, exhilarating ride that needs to be sustained by constant study and strategies to keep digital coins secure. Your gains may have spiked so quickly on a bullish year, but without the proper storage, you might lose these all to hackers and malicious threats online.
Thus, it is of high importance to safe keep cryptocurrency in a wallet. Your options are to keep these in a hot wallet or a cold wallet. In this article, we will differentiate both and share steps on how to create a cold wallet for cryptocurrency.
The Hot And Cold Storage
A wallet for cryptocurrency may either be hot storage or cold storage. Choosing which storage will work for you depends on how you typically use your cryptocurrency. One storage will be good for short-term safekeeping, while the other will be good for long-term safekeeping. Let’s dig deeper and explore the differences:
Hot storage is simply any wallet that allows you to store, access, send or receive cryptocurrency online. Examples of hot storage are digital wallets, mobile wallets, and desktop wallets. Essentially, hot storage encompasses any wallet which you can access with the use of the Internet. To get a hot wallet, all you have to do is choose from a host of available wallets online, sign up to register and use these for free. If you frequently use your cryptocurrency for online payments, online transactions, and fund transfers, then a hot wallet would be convenient for you.
However, with so many hackers lurking in the corners of the Internet, holding your cryptocurrency in hot storage may easily be compromised. Your cryptocurrency may especially attract these online threats if your digital tokens and coins are stored in huge amounts. Also, if you leave your cryptocurrency alone, and like your traditional investments, give them time to gain and grow, a hot wallet may not be safe and ideal. This is where learning how to create a cold wallet for any of your cryptocurrencies comes in.
Cold storage or a cold wallet then is more amenable for long-term safekeeping of your cryptocurrency. If a hot wallet stores your cryptocurrency online, a cold wallet is exactly the opposite because it’s all about storing your cryptocurrency completely offline. As a mechanism that, in a sense, keeps your cryptocurrency off the Internet, it is safer from cybercrime and malicious software encroaching on your gains.
However, a cold wallet does not really hold or store your digital tokens. What a cold wallet actually stores is the private key that you need to access your cryptocurrency. To use cold storage that keeps this private key, you may either choose between a hardware wallet or a paper wallet. A hardware wallet is a small, tangible device that looks like a USB stick which you can carry around. This physical device stores your private key. On the other hand, a paper wallet is a form of cold storage which keeps a copy of your private key on a paper printout. The keys are recorded on a sheet of paper as a typewritten series of characters or as a QR code that can be scanned.
So, to create a cold wallet for cryptocurrency, you can purchase a most secure hardware wallet because the private key is kept safely and unintelligibly into the device, without the risk of anybody decoding it through simple reading.
However, these compact hardware devices also command quite a steep price. Still, if you think about it, if your cryptocurrency is by the billions and millions, or at least these are the amounts that you target for your crypto investments. These compact storage devices are more cost-efficient, scam-free, and safer, and giving you more peace of mind in the long run. Examples of these cold hardware devices are the Trezor, the KeepKey, the CoolWallet S, and the Ledger Nano S.
Creating A Paper Wallet On Wallet Generator
If a cold hardware wallet is still far-fetched for you, it can be a long-term dream. Meanwhile, there’s the paper wallet which is also relatively safe and free to generate. Learning how to create a cold wallet, specifically a paper wallet, for the cryptocurrency is not rocket science. All it takes is to follow all the instructions that the offline wallet generating program asks you to do. Here are steps you can follow for bitcoin and most cryptocurrencies.
- Prepare your computer by checking that it is free from malicious software. If you can invest in a new computer dedicated solely to your cryptocurrency (ideally, if you keep a vast amount), much better.
- Visit the website Wallet Generator to generate your unique address.
- Once on the website, it will ask you to download a zip file where you will carry out the rest of the instructions. Go ahead and download as instructed.
- Turn off the Internet so that you can proceed to work offline. Your private key or wallet has to be generated offline.
- Locally open the file ‘index.htm’ which you have just downloaded.
- If the program is now running on your computer offline, generate a wallet by hovering your mouse over the characters.
- Wait for the counter to end in zero, then you shall see your unique, randomly generated key or wallet.
- Print this page out as the program instructs you to do.
- Keep this printout securely, and have duplicate copies so you won’t lose your private key. Remember that since you generated this offline, you will not be able to retrieve this key again. You are also advised not to save a copy of the page with your unique wallet on your computer because it may be at the mercy of hackers.
Creating A Cold Wallet On Electrum
Another option on how to create a cold wallet for cryptocurrency is through Electrum. Here are some steps.
- On the Electrum website, click on ‘File’ and then ‘New/Restore.’
- Make a name for the wallet you will generate.
- Select the wallet type among the selections given to you. You may choose any, but not the ‘Watch Bitcoin addresses’ option. For starters, choose ‘Standard wallet.’
- Click ‘Create a new seed.’
- You should have a mnemonic code for printing.
- Follow the rest of the instructions on Electrum.
There are many ways on how to create a cold wallet for cryptocurrency, and if it’s a paper wallet you’re going for, it is mostly free. So, if you are deciding between hot storage or cold storage of your cryptocurrency, you think of it this way: Hot storage is like your coin purse, which you have ready for quick, small, day-to-day payments. In contrast, cold storage is like your bank account, where you keep money or savings that you don’t plan on moving anytime soon. Learn more about cold wallet here!