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Cold wallet (hardware wallet): what is it and how to secure your cryptocurrencies?
What is a cold wallet type of wallet designed to securely store your cryptocurrencies while keeping your private keys completely offline . Unlike a software wallet, which remains connected to the internet, a hardware wallet isolates your digital assets from the risks of hacking and online attacks. Discover here what a cold wallet , how it works, the different types available, and the best cold wallet to protect your cryptocurrencies in the long term .
Table of Contents
What is a cold wallet ?
When you buy cryptocurrencies on a centralized exchange, you don't actually own your funds. You've entrusted them to the platform that manages your cryptocurrencies for you. This platform can go bankrupt, decide to freeze your funds, be subject to legal restrictions, or be hacked. Several centralized exchanges, such as FTX and Mt. Gox, have collapsed, and Bybit, for example, was the victim of a $1.5 billion hack.
Protecting your cryptocurrencies with the best possible level of security involves using a hardware wallet (cold wallet), which isolates your private keys from online risks.
A cold wallet is a type of wallet that provides cold storage for your digital assets. This means that the private keys needed to access your cryptocurrencies are never exposed to the internet. This isolation protects your funds from hackers, malware, and other online threats. cold wallet offer unparalleled security for your cryptocurrencies, ideal for investors looking to hold their cryptocurrencies for the long term.
The different types of hardware wallets
Hardware wallets are physical devices, such as the Ledger Nano X , the Ledger Nano S Plus Trezor wallets , and the Ledger Stax examples. These wallets store private keys in a secure environment and sign transactions offline, never exposing your sensitive data to the internet. All modern hardware wallets generate a secret recovery phrase upon first use, essential for restoring access to your funds in case of loss or failure.
Difference between a cold wallet and a hot wallet
In practice, a software wallet is ideal for users who frequently make transactions, regularly interact with decentralized applications ( DApps Dapp , or want quick access to their cryptocurrencies for exchanges, payments, or short-term investments. Its constant internet connection facilitates these operations, offering high responsiveness and ease of use.
On the other hand, a hardware wallet is perfectly suited for securing your primary assets over the long term. It allows you to keep your cryptocurrencies safe and secure, protected from the risks associated with online transactions. This solution is recommended for investors who want to protect their assets from hacking while maintaining complete control over their funds.
To benefit from both security and flexibility, it's often advisable to combine a cold wallet and a hot wallet : use the cold wallet to securely store your cryptocurrencies, and the hot wallet for more routine transactions. This approach allows you to enjoy the best of both worlds, adapting your cryptocurrency management to your specific needs.
To learn how to use a hot wallet, we offer our free step-by-step guide to using a decentralized wallet, with supporting screenshots.
The free guide will walk you through your first steps, from buying your first cryptocurrencies to creating a software wallet and making a transaction on the blockchain. It is available by filling out the form below.
To gain a deeper understanding of how the monetary system and Bitcoin work, and to develop a more comprehensive grasp of the tools, finance, and legal constraints, we invite you to explore the BSM program .
It includes detailed video tutorials on centralized exchanges, software wallets, hardware wallets, and essential best practices. The program can be accessed via the header or the link above.
How do I use a cold wallet ?
Using a cold wallet is simple but requires discipline:
- Initial setup : When installing a new wallet , such as a Ledger Nano, you generate a secret recovery phrase (12 or 24 words).
- Management via Ledger Live Ledger wallets , the Ledger Live allows you to manage your cryptocurrencies, install applications and monitor your portfolio.
- Transactions : To send funds, temporarily connect your wallet to your computer or smartphone, confirm the transaction on the device, then disconnect it. Private keys never leave the physical wallet.
- Security : Store your cold wallet and recovery phrase in a safe place, away from physical hazards or prying eyes.
Advantages and disadvantages of a cold wallet
Benefits
- Maximum security : The best cold wallet offer robust protection against hacking, as they are never connected to the Internet.
- Total control : You retain control over your assets without depending on a third party.
- Versatility : The most efficient cold wallet support many cryptocurrencies and advanced features ( staking , DeFi , etc.).
Disadvantages
- The disadvantages of cold wallet include less ease of access and additional steps to sign and send transactions.
- Risk of loss : If your device is lost or destroyed, and you have not saved the recovery phrase, there is no way to recover your funds.
- Cost : Some physical portfolios represent an investment .
- Cold cold wallet require a certain rigor in the management and backup of keys.
What are the best recommended cold wallet?
Ledger, the current world leader in hardware wallets, offers offline protection in models like the Nano X, Nano S Plus, Stax, and Flex thanks to their certified Secure Element chip (CC EAL5+ to EAL6+). This chip, also used in bank cards and passports, acts as a secure enclave that isolates your private keys and sensitive operations—such as key generation and transaction signing—from the rest of the device and any internet connection. Therefore, even in the event of a software or physical attack, your keys remain protected and cannot be extracted or compromised.
The Ledger Nano X combines Bluetooth connectivity with support for over 15,000 cryptocurrencies via the Ledger Live , which also facilitates staking and interaction with decentralized applications. The Nano S Plus is a good option for beginners, but it requires a wired connection. The Ledger Stax stands out with its large touchscreen and stylish design.
For its part, Trezor focuses on transparency and open source with models like the Trezor One , the Trezor Model T , and the recent Safe 3 and Safe 5 , which also incorporate an Secure Element . This open architecture allows the community to freely audit the code, strengthening confidence in the wallet's security.
The choice between Ledger and Trezor will depend on your preferences: Ledger offers a wider range of premium features and a comprehensive interface via Ledger Live, while Trezor appeals with its open-source philosophy and ease of use. In any case, both brands remain security standards for effectively protecting your cryptocurrencies.
To choose the right portfolio for your needs, it is advisable to consider the number of assets to manage and the desired features (Bluetooth, touch screen, battery life).
To look in more detail at the characteristics of each model, we invite you to read our articles on the Ledger models and our detailed comparison between Ledger and Trezor .
Tips for keeping your cryptocurrencies secure
- Protect your secret recovery phrase : Never share it, don't store it online, and keep it safe.
- Update your wallet : Make sure your device has the latest security updates.
- Use a cold wallet to secure your cryptos in the long term and a hot wallet for daily transfers.
- Always check the authenticity of your wallet : Buy it only through official channels.
Conclusion
What is a cold wallet ? It's the most reliable solution for storing your cryptocurrencies long-term and ensuring their security . While cold wallet require a bit more discipline and organization, they remain the gold standard for anyone looking to protect their assets within the ecosystem . For more details, a deeper understanding, and a step-by-step structure, consult the BSM program .
Quick FAQs
- What is a cold wallet ? An offline wallet to protect your assets.
- a cold wallet or a hot wallet ? A cold wallet is ideal for security and long-term storage, while a hot wallet is better for everyday convenience.
- What are the best cold wallet ? Ledger Nano X, Ledger Stax, Ledger Flex, Trezor Safe 3 and 5, among others.
- What are the disadvantages of a cold wallet ? Less practical for frequent transactions.
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Yoann
Trained as an engineer, I quickly became interested in the field of finance. Convinced that decentralized finance has a bright future, I am participating in its democratization by developing Crypternon.