If you’ve spent at least a day on the various online cryptocurrency forums, you’ve probably heard about the never-ending war between hot wallets vs cold wallets. The ongoing debate of which is better - hot storage or cold storage - seems like one that will never end.
In this guide, however, I want to tell you about cold wallets - why they’re superior to hot ones, their pros, and cons, price ranges and give you a list of the best cold storage wallets out there.
We’ll go over the definitions, compare and contrast cold wallets with the hot ones, list both of their benefits and drawbacks, and see if we can find a clear winner.
Learning the Terms Beforehand
The terms “hot wallet” and “cold wallet” are used to differentiate cryptocurrency wallets. Make no mistake, though, for it’s not the temperature that these terms differentiate.
Hot wallets are digital cryptocurrency wallets, while cold wallets are physical devices that store cryptos inside of them. There are other types of wallets, but hot and cold ones are the most famous ones.
Hot wallets are considered to be the more popular of the two. There are quite a few reasons why that is the case, and we’ll go through them in this guide. Furthermore, I will try to prove the point that cold wallets are superior to hot ones.
The digital cryptocurrency storing wallets have been around ever since the inception of Bitcoin. They come in two forms - online and desktop wallets. Mobile wallets are also considered digital, but because of their mobility, they could probably be classified as a hybrid wallet.
The two huge perks that digital wallets have are their ability to hold any cryptocurrencies AND that they’re free.
First, let’s cover the “all cryptocurrency holding” part. In the debate of “hot wallets vs cold wallets”, this point is often brought up by the digital wallet supporters.
When a cryptocurrency is created and the ICO is set underway, it’s not functional until you have a place to store it. The creators of the crypto are usually the people that also develop and create the wallet for it, too.
Various better known and more mainstream cryptocurrencies (like Bitcoin, Ethereum or XRP) have a wide variety of digital wallets available, with each offering different features and personalized customizations to choose from. Newer or lesser-known cryptos usually have one designated wallet with the basic functions of buying, selling and trading enabled.
This is a key point in the “hot wallets vs cold wallets” debate - many people hold or want to hold different, less mainstream crypto coins, but they cannot do this whilst having, for example, a cold wallet.
Another huge factor is that hot wallets are generally free. You can simply find one that suits your wants and needs, register and just use it - free of charge. This isn’t leisure that the cold wallet lovers could brag about - devices cost money, which in turn lowers their popularity and use significantly. It is tough to say what the statistics would be if both hot and cold wallets were free, but that's not possible.
As I’ve mentioned earlier, cold wallets are specifically designed devices that are designated physical cryptocurrency storage. Cold storage wallets, just like the hot ones, have their pros and cons, so let’s go over them.
One of the biggest benefits that the cold wallets provide is that you can have your cryptos beside you - wherever you go. You could never take the device out of your pocket - these wallets are usually small and compact, which enables both comfort and discreteness whilst transferring or simply carrying them around.
Cold wallets, however, have a few notable drawbacks when compared to their hot counterparts.
First of all, cryptocurrency cold storage tends to be expensive. A typical price tag for a cold wallet is around the $100 mark - depending on how much crypto coins you have, this could be dirt-cheap or extremely expensive.
Another huge drawback is that cold wallets have a very limited variety of cryptocurrencies they can store. To be honest, most of the cold storage wallets out there are only able to store the main crypto coins in the market, such as Bitcoin, Ethereum, Dash, etc.
This reason, in addition to them being quite expensive, tends to lower the cold wallet usage by quite a bit.
Why Cold Wallets are Superior to Hot Ones
If you’ve read the whole tutorial up to this point, you’re probably thinking - “how can cold wallets be superior? They are worse than hot ones!”. Well, there is one simple reason which makes cryptocurrency cold storage the way to go:
Cold wallets are the staple of security when it comes to cryptocurrency storage.
I have purposely kept this part out of the hot and cold wallet overviews. I have done this because it truly is so important that it deserves a section of its own.
Hot wallets are the most vulnerable wallets in the world. All of the digital wallets store your security keys and codes in their online servers, which are extremely vulnerable to hacker attacks, scamming attempts and other ill intent-driven actions. Sure, most of the high-profile hot wallet offering sites and companies have major security measures put in place, but all it takes is the smallest loophole for your savings to be gone forever.
When it comes to digital crypto storage, there is only one option worth considering - insurance. Sites like coinbase.com automatically grant you 100% insurance if you choose to trust them with your cryptocurrencies, which is a very rare and reassuring option.
Cold storage wallets, however, have a reputation for being impenetrable. The fact that your codes are nowhere else but in that little device surely offers a huge feeling of calmness. Moreover, some of these devices emphasize the security so much that even if you would plug them into a computer that has a virus (a keylogger, leacher or any other type of malware), your device would remain safe and secure.
When thinking about appropriate crypto storage wallets, security should be your number one priority. Who cares if you get the best free wallet available if you are left broke and empty-handed just a few days later? The best cold storage wallets are most definitely the safest ones, too.
Think of it this way: imagine that you have $5000. Two options are presented in front of you - place your money into a bank account that offers free storage but is very prone to break-ins (and has a history of it happening multiple times before) OR choose a bank account where you have to pay, let’s say, $100 but you can be sure that the rest of your funds are safe and sound. Can you catch my drift?
This is the main reason why I would say that cold wallets are superior to hot ones - you feel safe and assured that your cryptocurrency is safe while it’s in the cold storage wallet, which can’t be said about the hot one.
Now that we’ve covered this, let me tell you about the best cryptocurrency cold storage devices out there.
Best Cold Storage Devices
Let me just preface this by saying that this list isn’t composed in any particular order.
Who else would be a better contender to start this list off with than Trezor?
Released back in 2013, Trezor is the very first cryptocurrency cold wallet ever made. By popular opinion, it is the safest possible way to store your cryptocurrency.
Trezor is quite small and compact, making it easy to carry around. The company constantly updates their hardware to maintain the highest level of security possible.
Trezor retails around the price of $99. All things considered, this is a great price and quality ratio.
Ledger Nano S
Considered by many to be the main competitor of Trezor, the Ledger Nano S is a great alternative for anyone looking to one-up their crypto storage game.
One of the main praises that the Ledger receives is that it’s very similar to Trezor in terms of functionality, yet considerably cheaper.
The Ledger Nano S currently goes for around $80. Don’t let the price tag fool you, though - it is a huge name in the cold wallet industry.
KeepKey has a reputation of being the most fashionable of the four cold storage wallets. It’s quite a bit heavier than its two predecessors, which can be a good thing or a bad thing - you be the judge.
KeepKey is also the second-to-the-youngest of the four, which means that it has a lot of catching up to do in terms of experience. However, it isn’t on this list without a reason - being the so young, it has still managed to establish a name within the cold wallet enthusiast circles.
KeepKey retails at around the $129 range. It is the most expensive of the four, but also offers some additional functions and features that the Trezor and Ledger do not possess.
The CoolWallet S is an up-and-coming cold cryptocurrency wallet that has been making the rounds as of late. It's the world's first mobile crypto wallet - this means that even though it stores your cryptocurrency offline, everything is accessible on the mobile app that comes along with it.
The CoolWallet S retails at $99. If you choose to buy two at a time, it will cost you $159. All things considered, that's a great price!
Even though the CoolWallet S is still relatively young (the youngest of the lot), it has already proven to be extremely reliable and user-friendly.
Choosing a Cold Wallet
Now that you have an understanding of how different wallets behave and what benefits and drawbacks they have, it would be a good idea to define the criteria of picking the appropriate wallet for yourself.
I don’t want to get repetitive, but let me stress this just once more - security should be your highest priority when choosing a crypto storage wallet. There is nothing more important than keeping your cryptos safe, and a good wallet can ensure this with no problem.
Secondly, you’ll want to make sure that your wallet isn’t stupendously hard to use. Some wallets do have a steep learning curve - all of the options and settings in the UI can throw even the biggest crypto experts off. There are plenty of wallets that have user-friendly, approachable and understandable interfaces - take your time and pick one that suits you the most.
Another thing to consider is convenience. If you’re more of a hoarder that likes to have as much of the cryptocurrency as possible (to perhaps sell it off later on), then you don’t need a wallet that’s super easy to access. If you do plan to perform a lot of transactions, however, then your wallet would preferably be quite easy to access.
Lastly, if we’re talking about cold wallets, the size and compactness of the wallet are probably also going to play a part in your choice. Maybe you’re a person that likes to feel the weight of your stuff, so having a heavier wallet is a pro rather than a con? Or maybe you want something really small and light, so you wouldn’t even notice it while carrying it around? This part is honestly completely preferential - it all depends on the person in question.
Also, don’t forget that you can split your savings - let’s say, you can store the bulk of your Bitcoin in a cold wallet and then just lock it away somewhere, but at the same time keep a small portion of it in a digital wallet for easier accessibility and convenient use. Don’t be afraid to experiment - just be cautious while doing so.
We’ve covered the debate of “hot wallets vs cold wallets” by giving different points of view and talking about the pros and cons of both sides, talked about the best cold storage wallets and went over the main features to look at while searching for an appropriate cryptocurrency wallet. Be sure to put the information that you acquired here to good use - pick a wallet that will serve you for many years to come!
If you do decide on purchasing a cold wallet, don’t hesitate to do some more research on the internet beforehand - we only went over four of the main hardware crypto storing devices in this guide, but there are many more in the market! Perhaps you’ll come across one that will suit your needs perfectly.