Introduction
Cold wallet refers to the cryptocurrency wallet that is offline in nature (not connected to the internet). It is also known as cold storage. It reduces the risk of online threats like malware and hacking because it stores digital assets offline. Cold wallet is ideal for storing large amounts of digital assets for long-term. In this post we are going to discuss some major advantages and disadvantages of using cold wallet.
Pros Of Cold Wallets
The main benefits or pros of cold wallet can be pointed out as follows:
1. Ensures Maximum Security
As we know that cold wallet remains offline it provides security against online threats which makes it ideal for storing large amounts of digital currencies.
2. Protection Against Malware And Phishing
Users have full control over private keys because it does not rely on third party services. So, it eliminates the risk of malware, hacking and phishing.
3. Suitable For Long-Term Storage
If you follow "Buy And Hold" strategy, then cold wallet is perfect for you because it allows to store large amounts of digital currencies for a long period of time.
4. Wide Range Of Currencies
Cold wallets support multiple cryptocurrencies that allows users to store different types of cryptocurrencies in one device.
Cons Of Cold Wallets
Some notable drawbacks or cons of cold wallets can be described as follows:
1. Complex For Newcomers
Complexity is one of the main disadvantages of cold wallet. Setting up, generating private keys and understanding seed phrases makes it more complex than hot wallets.
2. Inconvenience
Cold wallet is not convenient for frequent transaction because it is designed for long-term storage of cryptocurrency. So, it is not ideal for small and frequent trading.
Also Read:
Things You Should Know Before Buying Bitcoin
3. Upfront Cost
Unlike hot wallets, some cold wallets may require initial investment (upfront cost) for ledger or trezor that may discourage beginners.
4. Possibility Of Physical Damage Or Loss
If not backed up properly, users may lose the access to their fund because it can be physically damaged, stolen or lost.
