In 2009, when bitcoins were launched, since then, the cryptocurrency industry has grown and has become more popular among all generations. People are now more interested in using and accepting virtual currencies, with a drastic growth in trading skills number of tokens and investors. However, with the increase in this industry, the rise in illegal activities regarding bitcoins is also rising, such as fraud, hacking, etc.
As there are no frameworks for regulations in the cryptocurrency industry, the owners who suffer through fraud and theft have no recourse.
They are the ones who should decide how and where to store their cryptocurrency and keep it safe from hacking and yet accessible to them. One of the safest and most protected storage means for storing cryptocurrency is the Cold storage system.
What does cold storage mean?
It is a process where your keys for cryptocurrency are removed from your wallet and are stored somewhere that does not require an internet connection or is not connected to any networks. In addition to that, this method does not have to communicate with any devices unless you plug it into the device when you want to access your keys.
The cold storage system was earlier a topic of concern during the development of Cryptocurrency over being hacked. In the early days of Cryptocurrency, the keys were written on a piece of paper and eliminated from the wallet to ensure that the keys were disconnected from their wallet to prevent key theft. Due to this, cold storage has undergone many changed and have advanced the protective layers because the users own billions of dollars worth of cryptocurrency.
Understanding the cold storage
For understanding the cryptocurrency cold stage, it is crucial to know the concept of its wallet. For users, the wallets are similar to what they used to keep their cash physically. The only difference is that the physical wallets keep the cash and cryptocurrency wallets keep the keys. These keys are necessary to perform the transfer of Cryptocurrency from a wallet.
There are two types of keys.
- The public key- It is like a personalized email address that is used toe to send coins.
- The private key- is like your password which only the coin owners only haveaccess to.
For safety purposes, the keys should be stored in some other place than your Wallet. Different types of wallets, paper wallets, are most commonly used by many in the cryptocurrency industry.
However, there are many other ways and cold storage techniques available which are limited only by your imagination.
- Paper wallets
It is not a well-protected or secure method for storing keys. The paper wallets have a QR code that can be scanned for processing faster transactions. The QR code has all the data that is required for spending the coins. Therefore, the safety of the Wallet is important. These wallets can be lost or misplaced, even the Inka may fade after some time, or you may accidentally damage it somehow. If you are choosing the paper wallet method, you should ensure its safety first.
- Hardware wallets
These are storage devices that may look like USB drives. These are plugged into your electronic device so that you can use them to access your Wallet. It is one of the safest and most well-protected ways of storing your keys. There are many devices available, from standard to advance, that can be used for storing your wallet keys.
- Sound Wallet
These are the more expensive way of storing your keys. The sound wallets require you to encrypt and record your keys into sound files on items like CDs, vinyl disks, etc.
These are some common types of cold storage methods that are widely used in the cryptocurrency industry for storing keys. Cryptocurrency is a very grown and popular medium for people to generate profit now, due to which users have invested billions of dollars into it. There is always a chance of hackers to back into your system and take all your earnings away, this is why keeping your keys safe in wallets is crucial. For more details, you can visit.