How Can a Cold Wallet Be Used?
In our tutorial on how to utilize a hot wallet, we discussed why you must at all costs preserve your seed phrase. Anyone who learns your seed word can siphon off all the resources. A cold wallet, also known as a cold wallet, is a cryptocurrency wallet that won’t use keys produced by connecting to the blockchain or the Internet.
Its status as a cold wallet for cryptocurrency is determined by its ability to generate keys without maintaining a network connection.
Being a cold wallet does not preclude connecting to the network, but using one does necessitate a constant connection, which results in better and higher security against hackers.
Your seed phrase is kept on the machine that is connected to the internet when using a hot wallet like Metamask. That, unfortunately, makes it vulnerable to hacking or phishing.
Your seed phrase is kept in a separate hardware device that is by default offline and significantly more difficult to hack in a cold wallet like Ledger and Trezor.
How may a cold wallet be used?
How to set up and use a cold wallet is shown here. Ledger will be used as an example.
- Turn on your cold wallet and adhere to the directions displayed on the screen. To access the wallet, you must generate a PIN number.
- The 24-word seed phrase should be written down and kept in a secure location. Keep many paper copies on hand.
- In order to access multiple cryptocurrencies, NFTs, or other digital assets, you might need to install apps on your cold wallet.
- For further details, see the Ledger Nano X setup manual.
How do I access the Hot Wallet?
The friction of utilizing your cold wallet is decreased by connecting it to a hot wallet. Ledger can be connected to
Metamask, for instance:
- Choose “Connect Hardware Wallet” from the profile screen in Metamask.
- Connect your computer to your cold wallet, then choose Ledger.
- Observe the directions on the screen.
- You’ll need to confirm each transaction by hitting a button on your cold wallet after connecting it to Metamask. Even though it takes extra work, it’s worthwhile to complete this step to protect your assets.
For further details, see the Metamask + cold wallet setup tutorial.
Cold wallet guidelines
Additional recommendations for using cold wallets are provided below:
- The seed phrase you choose is more crucial than the device itself. You can always get your assets back if your cold wallet becomes lost by importing your seed phrase into another wallet.
- Don’t load your cold wallet with your hot wallet’s seed phrase. The seed word is the only thing that can be kept offline in a cold wallet. This goal is defeated if a hot wallet seed phrase is loaded onto a cold wallet.
- Avoid falling into cold wallet phishing scams. Purchase a cold wallet only from the official Trezor and Ledger websites. Never reply to DMs or phony support emails requesting your seed phrase.
- After discussing hot and cold wallets, let’s move on to the topic of avoiding wallet scams.
It is a cryptocurrency storage model that supports user reserves and deposits and is primarily used to securely store assets.
Types of cold cryptocurrency wallets
The two primary categories of cold wallets for cryptocurrencies relate to the features of the devices used:
- Cold storage hardware typically takes the shape of a USB key or something similar. They have tiny screens with interfaces made to work with a connected device. It is regarded as the most secure technique for cold storage.
- The other popular bitcoin cold storage model is the paper wallet. It was among the very first. It enables the public and private keys needed to access the storage data to be registered on paper (or other written media).
How are cryptocurrency cold wallets used?
Whether it is a hardware wallet or a paper wallet, the utility of a cold wallet for cryptocurrencies will vary.
The hardware wallet enables direct device-to-device operation. For the paper wallet to operate, there must be an online platform available. In general, the widespread use of cold wallets has numerous remarkable features, including:
- higher degrees of security than continuously connected storage systems to the blockchain.
- Regardless of their value, they can be utilized as a deposit and storage mechanism for digital goods.
- The user alone will be responsible for managing the assets and using the keys.
By utilizing hidden keys, recovery phrases, etc., they retain various levels of security. These are tools that can be used to manage cryptocurrency on the majority of devices available today.