Cold wallets can keep information about your private passwords but they are recommended for users that visit it sporadically.
In order to start in the world of Bitcoin and cryptocurrencies, one of the concepts that the investor needs to be clear on is what is the use of wallets.
Wallets are virtual platforms created to store digital currencies enabled for funds exchanging, which are divided in two big blocks, hot or cold wallets that depend on the platform and how the users want to manage them.
Hot or online wallets can be managed from any device connected to the internet and its private passwords are stored in online servers of the same wallet. These wallets are ideal for those who want to make frequent transactions, however, if the passwords have a weak protection, they can be hacked and the user can lose their saved cryptocurrency funds.
According to calculations from professionals in computer security, hacker teams have robbed around US$1,100 million in digital currencies in the first semester of 2018 and they doubt that this money can be recovered because many of the resources robbed are used with activities related to money laundering.
There is born the interest from investors in using cold wallets, keeping their money in offline mode, differentiating from online hot wallets and avoiding a cyber attack. From a USB (pendrive) to a piece of paper, they are used to store the access codes to this wallet, although there are companies that sell similar devices to USBs but that are only specialized in this area.
In order to explain it better, external storage of personal passwords devices need to be connected to the computer when making a transaction and in that moment the funds are exposed. In this way cold wallets have an advantage because they were created to make direct transactions without having to connect to the computer.
However, David Emm, researcher from the Kaspersky Lab UK, company from the UK dedicated to computing security, explained that one of the benefits of hot wallets is that since they’re connected online, they have easy access, wherever you are, at any time and from any device with access to the wallet, allowing something very important in our time: immediacy. In addition, he added that a negative aspect of cold wallets is that the user needs to trust their funds to a third party and that is a risk factor for storing.
These two options aren’t the only options for password and cryptocurrency storage, there are also paper wallets in which people print their data to have access to their money with a paper sheet, in which long codes composed by letters and numbers are revealed, and leaving as the last option brain wallets that are simple but easy to remember, in which the investor needs to memorize their personal passwords. Due to the complexity of its codes users usually create formulas, using known phrases to remember them.
More people and companies are investing in cryptocurrencies, a market that is increasingly growing in the world and that promises to strengthen as a reference to the world’s economy in little time, hence the motive of malicious groups to control it through the theft of currencies and using it in illicit businesses. The goal is to create safe passwords and choose the wallet that fits more the user’s needs.