Cryptocurrency is currently the most popular new trend in investments. It is a fairly new form money commonly known as digital or virtual currency. Because of its nature, it has become a convenient form of trading and investing that has taken off quite rapidly. People are scrambling to get into the cryptocurrency craze, and the markets are ever growing larger by the minute. Although, the biggest barrier of entry still eludes most people, and that is the proper storage of their precious digital currency!
Storing and trading crypto currency can be a precarious concern, to say the least. As an arithmetical crypto-asset, you do not have to worry about the typical problems paper cash can pose. However, you need to have a little technological understanding in order to store and secure your cryptocurrency investments. One of the best ways to store cryptocurrency is in “cold storage” on a hardware device, but if you don’t want to spend 60+ bucks on one – you can create your own cold storage rather easily.
With the right technological savvy, you can easily make your own cold storage cryptocurrency wallet from just a USB stick, and a typical desktop wallet program. In this post, we will try to help you to learn just what you can do and how to go about creating a cold storage medium, as simply as possible.
What is a Cold Storage or Hardware Wallet?
A typical cold storage folder is made on a device that is never linked to the Internet, like an old disconnected PC or a USB stick. Not many individuals know that a cold wallet can be preserved offline as well as it can even be created offline. While you may have to go online once to download the software or files needed, you can do the rest of the work totally offline and keep that storage device offline as long as you want.
Hardware wallets are the second most secure and safe solution as far as disconnected wallets go, with paper wallets being the first. The advantages that hardware wallets have over paper are few, but worthy of consideration. While paper is un-hackable, for obvious reasons, they are also subject to easier loss and destruction. Hardware wallets are also a bit more convenient, and practical for repeated use.
When is it Best to Use a Hardware Wallet?
As long as you are only storing a set amount of cryptocurrencies that you won’t be using or updating, there is no need to ever bother bringing that storage device online ever again. If you wish to eventually spend or trade that currency, you can easily bring it online for whatever use you have planned. Of course, you will also need to connect online to synchronize the wallet and your funds periodically if you aren’t just using it to store a specific amount.
While cold storage is great for simply storing your cryptocurrencies, sooner or later you will require transferring your coins online. Once you need to connect online, for any reason – that is when you will face different security concerns. So deciding on cold storage should be based upon your investment activity.
You could simply set up a cold storage wallet that you put all of the currencies that you are done trading with, and use it as a safety deposit for them. It is good practice to do that, while holding another type of cryptocurrency wallet just for active trades.
This way you can transfer the currencies you wish to store from your trade wallet into your cold storage wallet, by simply paying yourself to the public address of your cold storage wallet. This type of multiple wallet utilization is quite common among cryptocurrency traders and investors.
Why Using Cold Storage is a Good Idea
Cold storage wallets will definitely provide you peace of mind, knowing that there is no way for a hacker to access your coins. The only way hacking is even possible is when you choose to transport them back online to either sell or to hand them over to a different site. As long as you keep the wallet offline, and never divulge the private key, you are completely safe.
Hardware cold storage is the best method to keeping your larger stores of cryptocurrency secure, safe, and private. However, make sure to back up your cold storage into multiple drives, or multiple offline computers if possible! Always keep at least three clones of your USB hardware wallet somewhere safe, in case of loss, drive failure, or data corruption.
How to Create a Hardware Cold Storage Cryptocurrency Wallet
The easiest way to create a hardware wallet is to use an old computer that is not connected to the internet, and the next easiest way is to use a USB stick. Both methods are done simply by downloading your software wallet of choice, and then installing it onto the storage device you have chosen. You can temporarily connect to the internet, just download the wallet, and then disconnect.
If you are doing it on an offline computer:
The best choice of OS would be Linux, a fresh install is best, wipe the computer and do a fresh install or install on a new partition. Then get a copy of a wallet like “atomic wallet” and install it on that computer. Keeping note of the public keys by notepad or whatever, send your cryptocurrency funds to the corresponding addresses in that wallet. Once it synchronizes, unhook it from the internet and you are good to go.
If you are doing it on a USB stick:
The most important aspect of making a good and secure USB wallet work, is to create it from a totally clean computer. Put the USB stick on the clean computer, then download and install your chosen wallet to it. Open the wallet and take note of the addresses, write the private keys on paper, and put the public keys onto a text file.
Use the addresses from the text file to send the cryptocurrency to, and once the wallet is updated you can eject it from your system and store it. I would recommend you making multiple copies or clones of that USB stick, for redundancy purposes.
Finally, either method can be easily backed up with your private key phrases that most wallets will generate for you. So in case you lose your wallet, USB stick, or computer access, you can always just install a new copy of that wallet somewhere else and use the key phrases to recover your portfolio of cryptocoins.
No matter how you decide to store your cryptocurrency, you should always make sure that your transactions are done on a clean computer, or a virtual disk operating system, and a safe internet connection. As long as you ensure those two things, your cryptocurrency should be safe and sound.