- What is a virtual currency wallet?
- What is a cold wallet?
- Types and characteristics of cold wallets
- Cold wallet summary
What is a virtual currency wallet?
“I bought a virtual currency!” At that time, many people may use exchanges and online wallets first.
However, unlike cash, there are various risks involved in storing virtual currencies.
Exchanges and online wallets are collectively called “hot wallets”. Hot wallets are highly convenient, easy to open wallets, and easy to trade and transfer virtual currencies. However, on the other hand, there are always risks such as security.
This time, I will explain about “cold wallet” which I would like to recommend as a safe storage method for virtual currency.
For more information on hot wallets, please refer to this article.
Trouble before buying virtual currency, which wallet should I choose? [Hot wallet edition]
・ What is a virtual currency wallet?
・What are hot wallets and cold wallets?
・Types of virtual currency wallets
・Advantages and disadvantages of hot wallets
What is a cold wallet?
A cold wallet is a type of virtual currency wallet that manages private keys offline, separated from the Internet .
The wallet does not contain the virtual currency itself, but contains the “private key” that can access the virtual currency as encrypted data.
Advantages and disadvantages of cold wallet
Cold wallets have the following advantages and disadvantages that hot wallets do not have, as they are not always connected to the Internet.
Benefits
Cold wallets allow you to manage your assets offline without the need for the internet. Since it is not connected to the Internet, hacking is impossible, so it is said to be the safest way to manage virtual currencies in terms of security . Furthermore, you can manage your assets without being affected by the bankruptcy of the exchange.
Cold wallets are often used in cryptocurrency exchanges, and almost all exchanges in Japan use them. The private key is also encrypted, and even if it is leaked, it is a management method that cannot be used by a third party. In addition, it is said that Bitbank stores private keys individually by multiple people, and virtual currency is stored in an environment isolated from the Internet by a dedicated physical device.
Cold wallets are a safe storage method, as they are used by many exchanges.
Disadvantages
Because it is a physical medium, it can be lost or stolen . Basically, it is not possible to restore virtual currency data when it has deteriorated over time, has been damaged or soiled, or has been lost or lost.
The advantage of being isolated from the Internet is that it is less convenient for transactions, remittances, and deposits and withdrawals.
Types and characteristics of cold wallets
There are three main types of so-called cold wallets.
・ “Hardware wallet” using “dedicated device (hardware)”
・ “Paper wallet” to write and store “address” and “private key” on paper
・Store in human brain (simply private key) (Just memorize) “Brain wallet”
Brain wallet is as you might expect, so this time I will explain in detail about “hard wallet” and “paper wallet”.
What is a hardware wallet?
A dedicated peripheral device (hardware) that stores a private key is called a hardware wallet.
The hardware wallet connects a device (hardware) to a PC via USB or Bluetooth, and is used within a dedicated app. Since the hardware wallet is different from ordinary storage media such as USB memory, virtual currency such as Bitcoin is not directly stored, but the private key that can access the virtual currency is recorded as encrypted data. ..
Benefits of hardware wallets
Since you can manage cryptocurrencies offline, there is no risk of hacking or bankruptcy of exchanges.
Furthermore, since it can be used by connecting to a PC, it does not take much time to deposit and withdraw.
In many cases, multiple types of supported virtual currencies are supported, and multiple virtual currencies can be stored in one wallet.
Disadvantages of hardware wallet It
costs money to purchase a dedicated device. And there are risks specific to hardware wallets, which can be lost or damaged.
Currently, the main devices are sold by overseas manufacturers, and it takes time and effort to update the firmware of the hardware wallet even after purchase.
- When purchasing a hardware wallet, be sure to purchase it from the official website of each manufacturer. Devices obtained through unofficial routes may have their internal software rewritten, and the private key of the virtual currency may be stolen.
Ledger Nano S
https://www.ledgerwallet.com
A standard product for hardware wallets. Even in Japan, it is available at large electronics retail stores.
Trezor
https://trezor.io
A hardware wallet that is said to have a relatively large number of users in Japan. Many information on how to use it is also introduced on Japanese sites.
CoolWallet
https://coolwallet.io
Card type hardware wallet. You can connect via NFC or Bluetooth instead of a USB connection.
What is a paper wallet?
As the name suggests, storage and described in the paper as “address” and “private key” is a way to. Simply put, “print the information to access the cryptocurrency on paper.”
A paper wallet can be easily created with a service on the web or paper wallet creation software, and it is completed by printing with a copy machine. However, since it is necessary to create a new paper wallet for each deposit and withdrawal, it is not suitable for people who frequently perform transactions and remittances, and it is recommended for those who are considering long-term storage of virtual currency.
Benefits of paper wallet Since it is printed on paper and managed, there is no risk of hacking after printing. Moreover, the cost can be kept quite low. There is also a sense of security that you can keep it at hand, so you do not have to worry about the bankruptcy of the exchange. In addition, the printed paper wallet can be used as a gift voucher by giving it to someone or giving it away.
* However, when creating a wallet, there is a risk of hacking if you use a PC infected with a virus, so please create it using a clean PC.
Disadvantages of Paper Wallet If you lose your “address” and “private key”, you will lose your virtual currency. If you lose your paper wallet due to fire or theft as well as loss, you will not be able to withdraw your virtual currency. In addition, the paper wallet may become unreadable due to deterioration of ink and bleeding over time.
As mentioned above, a new “address” and “private key” are printed for each deposit and withdrawal to create a paper wallet, so it is not suitable for people who want to make frequent deposits and withdrawals.
In addition, since only one type of virtual currency can be listed per paper wallet, it may be a little annoying for those who handle multiple types of virtual currencies.
Bitaddress.org
https://www.bitaddress.org
A paper wallet exclusively for Bitcoin. When you open the page, move the mouse cursor randomly or type in random characters until the center of the screen is displayed at 100%. Then, the private key, address, and two QR codes corresponding to them will appear, so print them out and you’re done. By the way, it is recommended to move the mouse randomly because it takes less time.
MyEtherWallet
https://www.myetherwallet.com
A paper wallet that can be stored by Ethereum. When you create a wallet with MyEtherWallet, you can save the wallet information in paper format. Set a password and save the keystore file. You will need this file to access your wallet with the password you just set. Then, the private key and address will be displayed, so print it out from “Print wallet information”.
Bithomp
https://bithomp.com/
A paper wallet that can store Ripple. The paper wallet printed with XRP information has a compact and smart design that can be folded. Both size and design are perfect for gifts.
Cold wallet summary
-Cold wallet is a type of virtual currency wallet that manages the private key offline, separated from the Internet.
-Since it is not connected to the Internet, hacking is impossible, so it is said to be the safest virtual currency management method in terms of security.
・ If the currency is deteriorated, damaged, lost or stolen over time, basically the virtual currency cannot be withdrawn.
-Cold wallet is strong in terms of security, but it is not as convenient as hot wallet, so it is recommended when storing a single virtual currency safely for a long period of time.
Click here for hot wallet
Trouble before buying virtual currency, which wallet should I choose? [Hot wallet edition]