Bitcoin cold storage refers to keeping your bitcoin entirely offline by using a technique that makes recovering of coins more challenging. Cold storage also known as cold storage wallet, is the opposite of a hot portfolio where bitcoin is kept online. Since bitcoin is a digital asset, keeping bitcoin online increases the risk or attack surface for having bitcoin stolen when held online. Therefore by keeping your bitcoin in cold storage, your chances of losing are greatly diminished.
What is a bitcoin cold storage wallet?
Bitcoins are accessed via passcode and keys-addresses that are kept in a bitcoin wallet. If this digital wallet is not protected, hackers can easily steal the keys and can obtain the currency without hustle. Therefore, bitcoin cold storage wallet is an excellent way to secure a digital portfolio as it includes keeping bitcoin offline away from internet access. However, the method is less convenient than encrypting, but it hinders hackers. Keeping some cash in the system for regular spending reduces the trouble of digging coins out of cold storage for the public and private keys onto paper. The cold storage usually has a QR code that can be scanned for guide transactions.
How to set up a cold storage wallet
The first step to get a bitcoin cold storage wallet is to create an offline bitcoin address. This address will include both a private and public pair which will never go offline until you are ready to spend it. Therefore, below is a simple guide on how to make a free cold storage wallet by using the paper wallet method.
Setting up a paper wallet
Setting up your storage paper wallet is relatively easy, simple and require very little technical knowledge. The first step to consider is to go to the bitcoin paper tool. Before doing anything else, on the page, you will want to save it locally to your computer. Therefore to save a web page to your local machine, press ctrl+s and save the file as a complete web-page. Also, after saving close out the open bitcoin.com paper wallet tool page, then disconnect your machine from the internet.
After disconnecting from the internet, open the save file on your desktop. Move the mouse around on the page and type some random letters into the text box to create extra entropy. Doing this enables you to create a random bitcoin address that has both a private and public key-pair. Since you save the file on the desktop and offline from the internet, the bitcoin address created is completed offline.
Print the page
The following step is to make an offline copy of your bitcoin address which is later loaded with bitcoin address for a complete cold storage solution. While on the desktop saved paper wallet page and internet access still disconnected, click on the print button. NOTE: before printing the page, make sure your printer is also disconnected from the internet. Once you are confident, print the page.
After doing the above, the hard part is over, and have now made an offline bitcoin address and created a hard copy of it locally for safe keeping. Also, on the printed page there should be the QR code and public bitcoin address with the matching QR code and private key. However, it is strongly advised to store the paper wallet somewhere safe and secure, such as a fireproof safe. After completing the above, you can now connect the machine to the internet.
How does this work?
NB Make sure to keep your private key safe and not share it with anyone or online.
Adding funds to your cold storage wallet
The next step is to add bitcoin to the portfolio. Just like any other bitcoin transaction, using a wallet you may have online, copy the address or scan the public cold storage wallet QR code, and send funds to your bitcoin cold storage. Having done this, you can easily check the funds anytime using a bitcoin block explores.
Redeeming bitcoin from cold storage
When you want to spend money from your cold storage wallet, you will need to transfer the private key to a bitcoin wallet you have online. Any portfolio that supports private key will work. For instance, an alternative online web wallet that allows importing private key is Blockchain.info. Below are simple steps to follow for you to import your private key on this wallet, simply
• Open the online wallet
• Click on settings and then click addresses
• Click on the import address button
• Copy and paste the bitcoin cold storage private key and then click transfer
• You can safely store the cold address and import the funds to your wallet.
Once you have successfully transferred your cold storage funds online, they are ready for use. Note, do not reuse cold storage wallets. This implies that, once you have redeemed them online it is vital to creating a new one when necessary.
Advantages of using bitcoin cold storage wallets
Cold storage wallets do not require an internet connection, and this automatically reduces the risk of piracy.
Cold storage wallets are one of the cheapest options for cold storage
Disadvantages of using bitcoin cold storage wallets
The most complex portfolios are not recommended for ordinary people to obtain.
There is no backup if you lose your wallet; therefore, there are higher chances of losing your currency.
To sum up the above, if you are looking for a place to store bitcoin, then cold storage is the best way to save it.
Because it’s an offline wallet it will protect you coin holdings from any hacker attacks.