MyBroadband hosted Coindirect’s co-founder and Chief Product Officer, Stephen Young, in its exclusive forum. Here,…
Cryptocurrency wallets have been around since the dawn of Bitcoin With the consistent adoption of cryptocurrency and altcoin prices continuously increasing, it’s important to have your own cryptocurrency for storing value.
If you’re new to cryptocurrency, one of the first things to know is that a cryptocurrency wallet is a secure digital wallet which is used to store, send and receive digital currencies such as Bitcoin (BTC), Ethereum (ETH), Ripple (XRP) and many other altcoins.
For long, the safety and security of cryptocurrency wallets have been in question; especially considering the number of scams that have entered the world of crypto. This is what ‘cold storage’ cryptocurrency wallets have been specifically designed for.
Coindirect digs further into ‘cold storage’ cryptocurrency wallets and how it works.
What is a cold storage cryptocurrency wallet?
A cold storage cryptocurrency wallet is a hardware wallet that is not connected to the internet. Hardware cryptocurrency wallets generally take the appearance of a USB drive or smartcard. Rather than generating a private key online, the hardware wallet is designed to generate private keys offline. Thus, when your cryptocurrency is being stored in a cold storage, it is essentially being stored on a platform that is offline.
How do cold storage cryptocurrency wallets work?
In using a cryptocurrency wallet, the wallet owner will receive a ‘wallet address’ – a unique ID that is required to make cryptocurrency transactions. However, the address is protected with a ‘private key’ – a unique string of numeric characters required to access the address and digitally sign transactions which are broadcasted to the network.
If this private key is stolen, the user’s Bitcoins or altcoins could be unlocked and accessed without authorisation, by a cyber hacker. Though, this may only occur with ‘hot storage’ (online) cryptocurrency wallets, as these types of private keys are connected to the internet.
Cold storage cryptocurrency wallets have been developed to provide a solution to this issue. In doing so, cold storages enables the ability to sign transactions with the private key in an offline environment. This means that any online transactions are immediately transferred to an offline, hardware wallet such as a USB, hard drive, paper, CD or offline computer. Here, transactions are digitally signed before sent to the online network.
Should a hacker attempt to compromise the transaction, they will not be able to access the private key used – hence, unable to hack the transaction.
The benefits of holding your cryptocurrency in cold storage
Popular hardware, cold storage wallets that utilise offline software include TREZOR and Ledger. With cold storage wallets, users are not only guaranteed safety and security.
Cold storage cryptocurrency wallets offer the following benefits:
- Private keys remain secure, as it will never be able to connect to an online server.
- The wallet is protected from unauthorised access.
- Prevents network-based theft.
Coindirect is running a Cold Storage Hardware Wallet Giveaway
- In order to participate, entrants must hold a Coindirect account and have cryptocurrency stored in their Coindirect wallet.
- Either purchase cryptocurrency on Coindirect using the P2P marketplace, Wallet or the Exchange. Alternatively, you can transfer cryptocurrency bought on other exchanges to your Coindirect wallet during the period of the competition.
Please note: you will not be eligible to win a hardware wallet if you do not own any cryptocurrency in your Coindirect wallet.
Access our integrated platform and #OwnTheFuture with Coindirect