In recent years, the popularity of cryptocurrency has exploded. With the rise in the value of currencies like Bitcoin and Ethereum, many people have started investing in cryptocurrencies and finding ways to store their currencies safely.
Apart from online wallets, you can also store your cryptocurrencies offline, which is essentially just a computer or device that is not connected to the internet. While this may seem like a secure way to store your assets, there are a few more pros and cons of using offline wallets that you should be aware of before making the decision to store your digital assets.
In this article, you will get insights into the pros and cons of storing cryptocurrency offline.
Pros of storing cryptocurrency offline
There have been a lot of security concerns related to storing cryptocurrency online. There are more chances of security breaches and with increasing hackers, it becomes quite risky to store them in online wallets. To prevent your precious digital assets from being hacked you have the option to store them offline as well through various means. There are multiple ways to store your cryptocurrencies offline.
Storing cryptocurrency offline makes it extremely hard to hack. These offline wallets don’t have any connection with the network. Hence, hacking or cyber-attack is not possible if you are not connected to the internet. It is often just a piece of hardware that has no way to receive wireless signals from any device.
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There is also no need to pay transaction fees when you are managing your own wallet. Someone has to confirm every transaction that takes place on the blockchain, and this requires electricity and computing power. We all want confirmation so our transactions go through quickly and smoothly, but it’s worth noting that there is a real cost associated with this process. One that comes out of your pocket if you use an online wallet service.
Best for storing a large number of funds
If you have small amounts of money invested and plan on trading frequently, storing your cryptocurrencies online is probably best for you. But If you have large amounts of money invested and don’t plan on trading often, or ever, then a cold wallet is probably right for you. Cold wallets are designed for long-term storage because they guarantee that no one can access your funds unless they have access to the private keys. Hence, make sure to keep it in a safe place where no one can access it.
Cons of storing cryptocurrency offline
Inconvenient to access
If you keep your cryptocurrency in a hardware wallet or a paper wallet, there is going to be some effort involved in accessing it. If you just want to check your balance, this is probably not a big deal for you, but if you are planning on spending any of your cryptocurrency in the near future then it can become inconvenient to access your offline wallets.
Since cold wallets are designed for security first and convenience second, they might not always be user-friendly. For instance, many cold wallets don’t support multiple cryptocurrencies and require users to manually convert from one coin to another. They also require users to manually download and install software updates, which may be a problem if you are not tech-savvy.
No PIN or password
No doubt storing your cryptocurrencies offline protects you from cyber attacks and hackers but there are different risk factors associated with cold crypto wallets. As with any other kind of cold storage device, a cold wallet can be stolen or lost if it’s not in your possession.
Unless you have a PIN or password on your wallet, someone who gains access to it will have full control over your funds. This makes it especially important to keep the device somewhere secure when you are not using it (or to set up a PIN).
Making transactions can be problematic
You will need to carry around cold wallets with you if you want to make transactions often. This can be problematic, as cold wallets are generally much larger. Unlike online wallets that are connected directly to the internet, cold wallets need some way of communicating with the outside world before you can access your funds. It can be hard to access funds if you need them instantly. Transfers require a private key that you must broadcast to the network to make your transaction complete.
If you lose the device, there’s no recovery option
Another most significant disadvantage of storing your digital currencies offline is that if you misplace your storage device or if it gets damaged, you may not be able to retrieve your funds easily or at all. This makes asset tracking and management much more difficult for those who choose cold wallets for storing their cryptocurrency.
If a user loses their private keys, they will lose access to their funds. Additionally, cold wallets can be destroyed. If your wallet is damaged or destroyed, you could lose your keys and funds forever. You will need to keep your cold wallet in a safe place that only you or trusted persons have access to. If you lose your cold wallet, it is gone forever and there is no way to recover it.
A cold wallet is a device that is completely offline, meaning it cannot be hacked over the internet. In fact, You can use this type of storage method to keep your currency safe while still having access to it when you need it.
Consider these pros and cons before storing your digital assets offline in cold wallets. These are a good choice only if you are storing large amounts of cryptocurrency and want the highest level of protection for their currency.