Today, the market is brimming with a myriad of crypto wallets to suit every taste: Bitcoin wallet, Ethereum wallet, hot wallet, cold wallet, and many more. Even the most seasoned member of the crypto community can feel overwhelmed amidst this plethora of models.
That's why the itez team has prepared this guide for you. Read through it, and you'll discover what cold wallets are, their advantages, how to choose the perfect option for your needs, and which wallet can be deemed the best in 2024.
What is a cold wallet?
A cold wallet, or hardware wallet, is an application or a small device (often the size of a flash drive). Its purpose is to store cryptocurrency offline, without needing constant internet access.
An offline wallet only connects to a WiFi network when its owner wants to initiate crypto transactions. When the device or application is not connected to the network, no one can access the funds stored on it – neither the owner nor third parties (such as malicious actors).
What a cold wallet looks like. Source
When we talk about cold storage for cryptocurrencies, we most often refer to hardware wallets. This is a physical device resembling a flash drive. Such a type of cold wallets is considered the most secure because it's practically impossible to hack.
These wallets generate both private and public keys using a random number generator, providing an additional layer of security. These keys are stored in the device itself, which is disconnected from the internet most of the time.
Advantages of using a cold wallet
We wouldn't be telling you about cold wallets if they didn't have any advantages. Let's find out what benefits cold storage has over its main competitor – hot storage.
Cold storage vs hot storage
As you already know from our guide, hot wallets work in exactly the opposite way: they have constant internet access, allowing for quick and frequent crypto transactions. In terms of this parameter, online crypto storage surpasses its offline counterpart.
Moreover, hot wallets are much more accessible – their interface is usually more user-friendly, even for beginners. You can start using them either for free or a small fee, whereas the price tag on cold wallets is often quite high.
However, there are numerous aspects in which hardware wallets surpass online ones:
First of all, security. Offline crypto storage undeniably ranks among the safest methods to store cryptocurrency. They are disconnected from the internet for the majority of the time and store private keys in an offline mode. Because of this, such storage solutions are virtually impervious to hacker attacks.
Additionally, cold wallets are not susceptible to malware and viruses, which often target hot wallets. Furthermore, many models of hardware wallets come with additional "armour," such as PIN codes, seed phrases, two-factor or biometric authentication.
Secondly, control over funds. The owner of a cold wallet is the sole possessor of the private keys, which grant access to the cryptocurrency stored therein. This approach eliminates dependence on third parties and transfers complete control into the hands of the owner. As a result, the level of confidentiality in transactions is heightened.
How to choose a cold wallet?
Considering the fact that the market is flooded with numerous crypto wallets, selecting one can be a daunting task. We've provided some key aspects to consider when choosing secure crypto storage.
1. Brand. Opt for products from reputable and well-established manufacturers that have been in the market for a long time. Such examples include Trezor and Ledger, which we'll discuss in more detail later.
Important note! It's better not to purchase a cold wallet from unverified websites or secondhand, as you risk encountering a counterfeit.
2. Price. Cold wallets often come with a hefty price tag, so it's essential to budget for the purchase in advance. For example, Trezor's wallets start at $59, while Ledger's start at a minimum of $65.83.
3. Cryptocurrency support. Research in advance which cryptocurrencies and blockchains the wallet supports. Ensure that the device allows you to work with the assets you prefer.
4. Functionality. Familiarise with the list of tasks that this wallet model can perform. For example, some devices offer additional features like built-in exchange or staking.
5. Security. Learn about the wallet's security features that ensure the safety of your funds. This may include PIN codes, seed phrases, two-factor authentication (2FA), and backup options.
6. Design. Pay attention to the size and screen of the wallet. Some models may be too large or fragile for constant carry.
Review of the best cold wallets
To narrow down your search, we've selected some of the best cold wallets and compiled a review for each of them.
Ledger is one of the most popular options for cryptocurrency storage. The manufacturer has been in the market for ten years, since 2014. It has earned the trust and love of the crypto community for its reliability and quality.
Let’s turn to Ledger Nano X review and discuss its main features, along with its pros and cons.
1. Cryptocurrencies. This cold wallet supports over 5,500+ different coins and tokens, including both the most popular ones like Bitcoin (BTC), Ethereum (ETH), stablecoins, such as Tether USD (USDT), and lesser-known altcoins. The model also supports NFTs (Ethereum and Polygon). This crypto wallet supports up to 100 applications.
2. Security. This model is built with a CC EAL5+ certified secure chip to ensure secure storage of the private key. The wallet is also protected by a 4 – 8 digit PIN code, which is chosen and set by the user.
3. How to use it. To use the wallet, you'll need to download the Ledger Live app. Then, depending on the device you want to use, you can choose one of the following options:
- Connect to your smartphone via Bluetooth. Ledger Nano X is compatible with iOS and Android.
- Connect to any desktop device via USB-C. The wallet can operate on operating systems such as Windows, macOS, and Linux.
4. Other features. The hardware wallet is equipped with an OLED screen with a resolution of 128×64 pixels. The battery allows continuous operation for 3-4 hours without recharging. The casing is available in four colours.
5. Price. $132.02 USD.
Ledger Shop website
Pros of Ledger Nano X:
- Can be used with both mobile and desktop devices.
- Supports a wide range of cryptocurrencies, stablecoins, and NFTs.
- High level of security.
Cons of Ledger Nano X:
- Relatively high price.
Now let's move on to the Trezor Model T review.
Trezor wallets are produced by the SatoshiLabs Group, which entered the market way back in 2013. Fun fact: it was their product that became the world's first hardware crypto wallet.
The Trezor Model T wallet has been around for quite some time now — since 2018 – but it remains one of the most popular options for cold storage among the crypto community. Let's dive into its features!
1. Cryptocurrencies. The model supports over 9,000+ different cryptocurrencies and tokens.
2. Security. You can set up a PIN and passphrase on the device to enhance access security, even in case of loss. To restore access to the wallet, developers offer standard and Shamir backup methods, as well as setting up a 12-word recovery seed phrase. To protect user privacy while using the wallet, it offers Tor browser integration and the option to enable incognito mode.
3. How to use it. To interact with the wallet, there's a dedicated Trezor Suite application. It allows users to send, receive. trade and track digital assets. It also helps users to constantly monitor their trading balance and confirm transactions directly through the wallet. The application is available for desktop devices running Apple, Windows, and Linux, as well as for mobile devices like Android & iOS.
4. Other features. This hardware wallet is equipped with a colour LCD display measuring 1.54 inches. It also includes a MicroSD card slot. Developers have provided a USB-C connection for connecting the device to a computer.
5. Price. $179.11 USD.
Trezor website
Pros of Trezor Model T:
- Leader in the number of supported digital assets.
- Does not require registration and verification, allowing users to maintain anonymity.
- High level of security.
Cons of Trezor Model T:
- One of the most expensive models in the market.
Last but not least, the heavyweight of the cold wallets segment. Our third item is in the KeepKey review.
The KeepKey hardware wallet was released by ShapeShift in 2015, making it the second cold cryptocurrency wallet in the world.
1. Cryptocurrencies. This model supports 7,000+ assets and 350+ chains.
2. Security. When starting to work with the device, you'll be prompted to create and set a PIN code of up to nine digits. Every KeepKey device generates a 12-word recovery sentence during initialisation that can be used to retrieve your private keys and crypto. Additionally, users can optionally set up Universal 2nd Factor (U2F), which allows protecting access to various service accounts using a hardware device. Moreover, the metal casing of this wallet protects it from physical damage.
3. How to use it. The device is compatible with Windows, MacOS, Linux, and Android. The wallet is connected to the computer via Micro-USB. To perform cryptocurrency operations, wallet owners are offered to use the tools of the popular ShapeShift platform, the manufacturer of KeepKey.
4. Other features. KeepKey is the wallet with the largest OLED display on the market (3.12 inches). The wallet operates on an ARM® Cortex™-M3 processor. The casing is available in five colours.
5. Price. $78.00 USD.
KeepKey Shop website
Pros of KeepKey:
- The most affordable price.
- Supports a large number of cryptocurrencies and blockchains.
- High level of security, including protection against physical damage.
Cons of KeepKey:
- Due to its large size, the wallet is inconvenient to carry around.
Tips for secure cryptocurrency storage on a cold wallet
So, we've found out that the level of hardware wallet security itself is very high. However, you can make your wallet even more secure by adding an additional layer of protection. Below, we've gathered some of the best practices for cold wallets.
1. Passwords. PIN codes, seed phrases, and any other codes are the most obvious part of securing your wallet. Your device will typically prompt you to set up all necessary passwords during the initial setup. You will need to enter the PIN code each time you turn on the device, and the seed phrase is used to restore access to your funds if something happens to your wallet.
Additional tips:
- Consider backing up your seed phrase in advance by writing it down on multiple sheets of paper and storing them in different secure locations.
- Enable multi-factor authentication (MFA), which works for all your accounts associated with the wallet.
- The multisig feature requires multiple signatures to send a transaction, providing added protection even if hackers gain access to the wallet.
2. Network security. The main idea is to always keep your wallet in offline mode and only connect it to the network when you need to transfer your funds.
Additional tips:
- Public networks and computers pose potential security risks. For optimal safety, it's best to connect your wallet only to your own Wi-Fi network and devices that you are completely confident in securing.
3. Asset Protection. No matter how secure a cold wallet is, keeping all your funds on one device can be risky. It's better to distribute cryptocurrency across multiple wallets. Also, always double-check the address before sending funds. Mistakes can lead to loss of funds.
Additional tips:
- Always be aware that there are scammers in the crypto market. Do not click on links from suspicious emails or messages — they could be phishing attempts to lure your seed phrase or other confidential data.
4. Wallet protection. It's a good idea to regularly update the wallet firmware, operating system, and device software you are working on. Such updates fix many bugs and can protect you from vulnerabilities.
Additional tips:
- Ensure that a reliable antivirus is installed on the device to which your cold wallet is connected. This will protect your device from malware.
5. Physical security. Constantly carrying your cold wallet with you is not advisable. It's safer to store it in a secure location that only you are aware of, such as a safe. Additionally, using a protective case or cover can help shield the device from physical damage.
Conclusion
As of today, cold wallets are the most secure way of storing cryptocurrency. However, even with such a reliable device, it's important never to forget about all the security rules when dealing with digital assets.
Remember that the security of your funds is your responsibility! And the itez team is always here to provide you with more information about all these complex technologies of crypto, blockchains, and DeFi.
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This article is not investment advice or a recommendation to purchase any specific product or service. The financial transactions mentioned in the article are not a guide to action. It’s not intended to constitute a comprehensive statement of all possible risks. You should independently conduct an analysis on the basis of which it will be possible to draw conclusions and make decisions about making any operations with cryptocurrency.
