Digital Wallets & Cold Storage | How Do They Work?
Wallets: Public & Private Keys
Digital Wallets and Cold Storage are how and where you store the information that states you own cryptocurrency on a given block chain. This is where you can keep your Public and Private Keys. Digital Wallets and Cold Storage are important for your ability to send and receive Bitcoin and other Cryptos.
Wallets operate similar to how emails works. With the exception that you should only use the address for each transaction once to maintain security. Each time you need to make a new transaction, generate a new address and give that to the paying party. Or vice versa someone can send you their address for you to pay them from your wallet.
Crypto currencies operate on a peer-to-peer system. Hence it’s important that whenever you disclose sensitive information like your address, public key, or private key. That above all you trust the party on the other side of the transaction.
There are many different types of wallets. It’s important to be careful which wallet you choose to store your funds and where you buy your crypto. Consider the security and transaction fees associated with each wallet to find one that suits you best. There are wallets for one type of crypto currency only (E.g. Bitcoin), and there are multiple currencies wallet which support multiple digital assets.
There are few different types of wallet: Online Wallet, Mobile Wallet and Cold Storage. You should also understand the definition of Public and Private Keys. This will help you to evaluate whether you are comfortable with storing your private keys with the wallet provider. You may prefer to store your private key in a place where you have direct control.
Choosing The Right Digital Wallet:
We recommend using Trust Wallet which is a multi currency digital wallet that is now the official wallet for Binance. Trust Wallet is secure, allows for instant trades, is completely anonymous, and has a Web3 Browser that allows you to interact with decentralized applications (DApp) directly from inside their app.
Large exchanges like Coinbase provide multi-currency online and mobile wallet services. You can have multiple Bitcoin wallets under the same account. Their Wallet supports all major cryptos like Bitcoin, Ethereum, Bitcoin Cash, and Litecoin. You can also have a fiat wallet (USD / EUR / GBP) to facilitate trading on their exchange.
Blockchain.com also provides online and mobile Bitcoin wallet services, it is a hybrid wallet – meaning the company stores your wallet online but they do not have access to your private keys.
Breadwallet is a digital wallet that supports both IOS and Androids.
Simply put, Cold Storage also known as a ‘Cold Storage Wallet’, is a way to store your crypto offline. When using online wallet services you are exposed to the risk of your funds being hacked. By keeping you Public and Private Keys offline you reduce the attack surface in which your funds can be hacked.
We recommend and sell Trezor Wallet cold storage devices.
Alternatively, you can also print out your private key on a piece of paper, some people use this method and keep the piece of paper in a safe location (e.g. deposit box / vault at a bank). However, it is important to keep in mind that if you lose your keys. Consequently, your crypto is not only out of your possession it can’t be circulated or recovered by anyone else, EVER. It is estimated that around 30% of Bitcoin has been lost forever due to negligence, carelessness, and in some cases wilful destruction.
For more info. watch this tutorial video on how to setup a digital wallet.