The importance of cold wallets in the world of cryptocurrencies

In the changing ecosystem of cryptocurrencies, the security of digital assets is a primary concern. Cold wallets have emerged as a robust solution for protecting investments in cryptoassets. Let's explore in detail what these tools are and how they work.

What is a cold wallet?

A cold wallet is a cryptocurrency storage device that operates offline. This fundamental feature provides a higher level of protection against cyber threats, safeguarding users' digital assets from potential online attacks or vulnerabilities.

Operation of cold wallets

It is common to misinterpret that wallets, whether hot or cold, store cryptoassets directly. However, it is crucial to understand that:

• The cryptoassets reside on the blockchain network.

• Wallets only contain the key pair: public (the user's address on the blockchain) and private.

• Access to the cryptoassets is exclusively done through the corresponding private key.

• The private key allows users to authorize and execute transactions from their address on the blockchain.

The essential function of a cold wallet is to manage and safeguard the user's private key in an offline environment. Therefore, it cannot interact directly with decentralized applications (dApps) and is suitable for the custody of assets in the long term. To perform transactions, users must transfer the necessary funds from the cold wallet to a hot wallet, which then handles the operation and communicates with various dApps over the internet.

Types of cold wallets in the market

Ledger cold wallet

Ledger cold wallets are very popular among users. These wallets are protected by a sturdy metal casing and are similar in size to a conventional USB memory stick. Some standout features of Ledger wallets include:

• Ability to store multiple cryptoassets such as Bitcoin, Litecoin, Ethereum, and other altcoins.

• Data backup and recovery features in case of failures.

• Intuitive interface with a modern OLED display.

Among the most sought-after models from Ledger are the Ledger Nano S and the Ledger Nano X.

Trezor cold wallet

Trezor, launched in August 2014 by Satoshi Labs, was one of the first cold wallets designed for the storage of bitcoins. Among the cryptoassets that Trezor can store are Bitcoin, Litecoin, Ethereum, Dash Coin, Bitcoin Cash, and Dogecoin, among others.

Highlighted features of Trezor:

• Support for multiple cryptoassets.

• Quick setup in approximately 15-20 minutes.

• Ease of use with basic computer knowledge.

• High level of security, protecting access to servers and administration pages.

• Backup capability through specific recovery phrases.

SafePal cold wallet

SafePal is the first cold wallet brand that Gate has invested in. The SafePal interface is intuitive, with multiple layers of security that facilitate storage, transactions, and exchanges in a convenient and secure manner. Its main features include:

• Storage of various cryptoassets in a single wallet.

• High security with offline storage of private keys and a self-destruction mechanism in case of tampering.

• QR code-based communication with the app, no internet connection required.

• Possibility to make transfers and transactions at any time and place.

Is it advisable to use a cold wallet?

Using a cold wallet is essential to protect your cryptoassets from security risks. Unlike hot wallets connected to the internet, cold wallets are physical storage devices isolated from the network, which prevents malware or hacker attacks. These wallets implement multilayer security systems with PIN codes and an automatic reset function if incorrect codes are entered repeatedly, ensuring maximum protection of your assets.

While hot wallets offer convenience for everyday transactions, they are not suitable for storing large amounts of cryptoassets. Losing access to the account or being hacked could result in the total loss of your assets. Therefore, using a cold wallet is the optimal choice to safeguard important holdings of cryptoassets, ensuring absolute privacy and security for your investments.

Procedure to transfer cryptoassets to a cold wallet

The process of transferring cryptoassets to a cold wallet is similar to that of hot wallets, following these three steps:

1. Copy the wallet address shown on the cold wallet device, ensuring to select the correct cryptoasset and the corresponding blockchain network.

2. Transfer the crypto coin from your current location (exchange, another wallet, etc.) to the copied cold wallet address, double-checking the correct coin and network before sending.

3. Check that the balance has been updated in your cold wallet.

Advantages and Disadvantages of Cold Wallets

Advantages

• Maximum security: cold wallets manage private keys in an isolated environment, virtually eliminating all risks associated with online storage.

• Total control: users have full control and ownership of their assets without relying on third parties.

• Portability: Cold wallets are usually compact and easy to store and transport.

Disadvantages

• Greater complexity: Requires connection to another device to perform transactions, which is more complicated than using hot wallets.

• Higher cost: Acquiring a cold wallet involves a greater outlay than software wallets, although it is a justifiable cost due to the security it provides.

• No direct interaction with DApps: needs to connect to a hot wallet or transfer funds to interact with decentralized applications.

• Physical vulnerability: being a tangible device, it can suffer damage, breakage, or deterioration over time, which could affect access to the private keys.

Frequently Asked Questions about Cold Wallets

Is it possible to hack cold wallets?

Although they are more secure than hot wallets, cold wallets could be vulnerable to techniques such as phishing or social engineering. Some cold wallets include features to protect against these attacks, but the private keys remain encrypted in the hardware, making hacking a potential, albeit remote, threat.

What is the price range of cold wallets?

Cold wallet prices generally range from 50 to 250 dollars, depending on the model, features, security level, variety of cryptoassets supported, and compatibility with applications.

What is the best cold wallet on the market?

Among the most valued and used cold wallets are models such as Ledger Nano X, Trezor Model T, SafePal S1, ELLIPAL Titan Bundle, CoolWallet Pro, Keystone Pro, and Blockstream Jade.

We hope that this information about cold wallets is useful to you and helps you select the most suitable option to effectively safeguard your cryptoassets. If you have any additional questions, please feel free to consult us.