You’ve probably heard this before by your friend or colleague that introduced you to the wonderful world of cryptocurrency: “You need to store your bitcoin offline using cold storage”. So what does that mean exactly? There are many forms of cold storage, but there is considerably more forms of “Hot Wallets” or storage that is convenient and directly tied to an internet connection. I don’t need to tell that this form of storage is convenient, but is riddled with considerable risk. With a normal bank account, if there is fraud or if someone hacks your account, you have recourse, and in most cases your will not be liable and be fully reimbursed. No harm no foul, right?
That is not the case when it comes to cryptocurrency. It’s about self-sovereignty and full ownership and responsibility of your own finances. With that in mind comes a great deal of responsibility and in this case, responsibility over your own finances and your own bank is a blessing. So what do you need to know? You absolutely, 100% need a cold storage solution for storing your cryptocurrency offline to keep your private keys and recovery seed safe. I am going to share with you below the 3 best cryptocurrency and bitcoin cold storage solutions, starting with what I consider to be the most secure, all the way down to what is not so secure. However, everything that is offline (generally speaking) is still more secure than keeping your long term holdings on a phone or any other internet connected device.
Here Are The Top 3 Cold-Storage Solutions For Storing Your Cryptocurrency Offline
Be advised that these are considered to be the best practices currently in the industry and most commonly used tried and true methods. There are other ways to go about this, but as they are not properly vetted and not as commonly used, we will not be listing them here.
#1 Hardware Wallets (Most Secure)
You can probably tell by now that I am a strong advocate of hardware wallets. I even developed and built one working for a very prominent cryptocurrency company and I have the latest prototype not 2 feet from where I sit now. I have a lot of first-hand experience in understanding why it is vitally important to own one and use one for any amount of cryptocurrency you don’t plan to spend in the next 24 hours. It has some keen advantages on top of being an “offline” device, which means it cannot be hacked.
- Private keys are generated on and never leave the device, even when it’s connected to the computer. This is crucial because if your private keys are stored in a secure environment and they are never removed from the device, there is no risk of them being exposed to the internet.
- Custom PIN Encryption – This is an extra layer of security that requires the user to set a 4-8 digit custom pin once it’s connected to USB port that is connected to the internet, like a desktop or laptop (or even a mobile phone). Without this PIN, you cannot even gain access to the application to make changes or sign transactions.
- Additional Device Verification – This means that any action you take on the web or desktop application with your mouse or a keystroke, requires authentication on the device itself to ensure there is no key-logging or unauthorized changes. For example, If I want to spend 0.25 BTC on a new snowboard on Amazon (Yes, you can do this with Purse.io), and you initiate that within the web app, it will prompt your to confirm the transaction on the hardware device via physically pressing a mechanical button. This is to ensure no mistakes and no unauthorized transactions occur.
#2 USB Drive (Not As Secure)
This option is better than leaving all of your holdings on a hot wallet, but is still not recommended. Why? Because unlike a trusted hardware wallet, it has no security measures. If someone gains access to the unsuspecting USB drive, they will have unfettered access to your precious private keys. It is not encrypted, it is not protected, and anyone with access to google can crack this if they have physical possession of it. Additionally, I cannot tell you how often these little devices have hardware failures. If you do not have a backup of these keys, your coins will be gone forever if something goes wrong.
#3 Paper Wallet (Even Less Secure)
This one is a “Catch 22”. What do I mean by that? Well, I see the value of what it is and I understand why this invention was created. For instance, when I wanted to give my loved ones some bitcoin in their stocking at Christmas, it was (and still is) a great way to introduce bitcoin to the uninitiated and get them excited about this new technology. A paper wallet is exactly what it sounds like, it’s your bitcoin in paper form. It usually includes a QR code to scan with your phone and import into a hot wallet and contains a written public and private key. This is not secure, but if you are gifting it to someone, or making a trade or transaction offline, it’s a decently good medium, especially if you don’t know or necessarily trust the recipient.
As I mentioned above, if you are unfamiliar with this amazing piece of paper, it exposes everything you need to take control of this bitcoin. It has written out the public bitcoin address and the corresponding private key. If someone dropped this in the wind and I picked it up down the road, it would be like getting a winning lottery ticket (literally). As you can see there are very few recommended uses for this, and even when using this, you need to be very, very careful.
When choosing the best cold storage solution for you, you need to understand what your end game is. What is your purpose and intent when deciding to pull your crypto offline? Most people who learn about the many advantages about cryptocurrency, typically plan to hold it for an extend period of time, whether it be for a long term investment or even everyday spending (like me).
The Bottomline: Unless you are planning to give some bitcoin away as a gift or you are making a one time transaction with a stranger in a dark alley, I STRONGLY recommend you purchase a hardware wallet. One of the most popular ones right now and is widely supported by a wide range of different cryptocurrencies is only $59 at the time of this writing. Believe me, it won’t be that price for long. Once the next market cycle starts to ramp up, these prices are going to be increasing, and it is a steal considering you are protecting potentially millions or billions of dollars worth of lifetime crypto-assets. The hardware wallet in question here is the Ledger Nano S, and I use this as one of my everyday wallets as well for spending. If you click the “SHOP” button at the top, you can see all the different wallets we offer and endorse right now, depending on what features you need and what works best for you.
If you have any questions or comments on this post, please sound off below! I’d love to hear from you! Until next time…
The Crypto Renegade
NOTE: This post may contain affiliate links. This adds no cost to you but it helps me focus on giving as much value as possible in every single post by being compensated for recommending products that help people succeed.