London, England – 11th January, 2022 – Cryptocurrencies are a popular concept globally, but recently concerns have been raised about how they can be safely stored. The collapse of FTX was the most high-profile example of why online exchanges cannot guarantee you will not lose your money. As FTX unfortunately demonstrated, if your money is in an exchange and the exchange is mismanaged or hacked, then your money is unrecoverable.
The growing popularity of cryptocurrencies has also led to an increase in attempts to steal virtual coins. According to figures from blockchain analytics company Chainalysis, over $3 billion has been stolen by hackers across 125 hacks in 2022. In October 2022 alone, $718 million was stolen in 11 different hacks.
This insecurity has naturally led many investors to seek alternative storage methods for their cryptocurrency. In the same way that physical money is kept in a physical wallet, digital assets are stored in digital wallets. When you buy cryptocurrencies, you receive a private key that holds the information used to authorize transactions on the blockchain network. A private key allows the owner of the key to spend the associated cryptocurrencies; without it, you will be unable to access your money. It is therefore vital to keep your private key in a safe place.
A cold savings wallet is the safest option for storing private keys as these digital wallets are not accessible via the Internet. A sensible choice is to put the majority of your cryptocurrency in a cold savings wallet and a small amount of spending money in a hot wallet that is stored digitally on a mobile device.
There are two types of cold savings wallets that are proving popular. One is a hardware wallet that uses a small plug-in device, such as a USB drive, to store your private key. To access your cryptocurrency assets you have to plug the USB drive into a computer. The other option is a paper wallet that prints your information on a piece of paper. While many hardware wallets are vulnerable to hacking and theft, paper wallets give you direct control over your cryptocurrency.
An excellent example of a successful paper wallet is Bitcoinpaperwallet.com. They have security protocols built into the design to fully protect your private keys. The area on which the important information is printed is folded up and securely taped shut to stay hidden. Bitcoinpaperwallet.com also prints a pattern on the paper so it is impossible to read what is inside, even if a bright light is shone through the paper. Single-use, serialized, tamper-evident hologram stickers secure the folded wallet. The Bitcoin paper wallets also come with waterproof, zip-sealing bags to further protect your paper wallet. The wallets can be printed offline to completely remove any danger of your transaction being hacked, and they offer helpful tips on how to check all records are entirely deleted from both your computer and printer.
An interesting use of paper wallets is that it makes giving cryptocurrency as a gift much easier. Paper wallets can be printed in various designs and easily personalized. Even if the recipient is not tech-savvy and knows nothing about cryptocurrency, the wallets come with full instructions on how to access the money.
There are a couple of minor downsides involved in using cold savings wallets. One is that it takes slightly longer to access the cryptocurrency. The other is that sensible precautions must be taken to physically store either the USB drive or the paper wallet in a secure location, such as a safe or bank box, just as you would with any other valuable assets. However, the security of knowing that your money/coins cannot be hacked, stolen, or lost far outweighs these slight inconveniences.