However, with an increase in capital, the risk of losing tokens due to hacking and other incidents increases. In this regard, cold wallets are the safest solution. The Incrypted editors figured out what they are and which models are best to use.
What are cold wallets and why do you need them?
A cold or hardware wallet is a physical device that stores the private key of a cryptocurrency address in an environment isolated from the Internet. This approach makes it possible to protect the user as much as possible from all kinds of hacking.
As a rule, this is a compact product that has the dimensions and shape of a USB drive, although some developers offer other options. For example, the form factor of a bank card or a small smartphone.
The principles of operation of cold wallets and their difference from hot wallets
It is a common myth that cold wallets are necessary for storing assets. In fact, all funds are located on the blockchain, while devices are needed to interact with them. In fact, the user will not be able to take any action unless he confirms the transaction on the physical device.
That is why hardware solutions are considered the best option for ensuring the safety of funds. To work with them, special programs are used, which work with them in the form of a wired connection or via Bluetooth.
Most often, manufacturers release proprietary applications that function exclusively in connection with their products (Ledger Live or Trezor Suite). Some developers of hot wallets — such as Trust Wallet and MetaMask — also do not prohibit their use as interfaces.
Thanks to this, even if an attacker somehow gains access to a user’s smartphone or personal computer, he will not be able to withdraw his funds, since this requires a physical device at hand. In addition, to unlock it, you need to enter a password or confirm the login with a fingerprint.
Review of the best cold wallets
There are a huge number of decent solutions on the market, but among them we can single out the top 10 most successful products.
Ledger Nano S Plus
The most affordable version from Ledger, which supports more than five thousand tokens on major networks, including Bitcoin, Ethereum, Avalanche, Tron, Solana and Polygon. Allows interaction with NFTs.
The wallet has the form of a flash drive with a small screen and two buttons for controlling it.
The device is operated through the Ledger Live application, available on Windows, MacOS and Android. A wired connection via USB-C is used. With its help, the functions of sending and receiving assets are available, as well as staking a number of them. Exchange within the application and the possibility of buying digital currency using a bank card are offered.
Ledger Nano X
An older model from the developers at Ledger. It has all the advantages of the younger version, while supporting Bluetooth connection on mobile devices running Android and iOS. For this, a battery is built into the wallet for its autonomous operation.
Also highlighted is the Ledger Recover function , available only for Ledger Nano X. It allows you to encrypt the wallet seed phrase , split it into three parts and transfer it to trusted companies.
This is useful in case the user loses or forgets the mnemonic set of words. With the help of this service, you can restore access to the device. This option is paid and requires identity verification, for which many users criticized the company.
Trezor Model One
The first and simplest model from Trezor. More than a thousand tokens are supported. A detailed list can be found here .
However, it is worth noting that the proprietary application Trezor Suite offers work with a limited number of assets. For the rest, you need to use third-party programs. For example, Exodus or MetaMask. With their help, you can also work with NFTs.
The wallet supports wired USB-A connection to devices on Android, MacOS, Windows and Linux. It has small dimensions and a password protection function. Control is carried out using two physical buttons.
Trezor Safe 3
The second iteration of the wallet from Trezor, which has the same shape, but is assembled from higher quality materials. Available in two variations. The first supports only bitcoin, and the second supports more than a thousand tokens .
Unlike the younger version, it is possible to work with XRP, Solana, Monero and Cardano. The USB-C standard is also used for connection.
SafePal S1
The first product from the SafePal company of the same name. It has the form of a small rectangular device with a display and a camera. Supports more than five thousand tokens, which can be found here .
The device has a built-in battery that is charged via a wired connection via USB-C. At the same time, a camera, a color touch display and five physical buttons are used to control the device. In this configuration, the user can operate the product autonomously.
However, the full functionality of SafePal is achieved when working with a proprietary application, which can also be used as a third-party hot wallet. Installs on iOS, Android, Windows and MacOS. In this way, NFT staking, exchanges and support can be accessed.
SafePal S1 Pro
It is an updated version of SafePal S1, but in terms of functionality it is no different. However, this device has a higher build quality due to the aluminum case, as well as an increased battery capacity.
SafePal X1
The third product from SafePal, which has similar functionality as its predecessors. At the same time, it has a form factor that resembles a compact calculator with a small monochrome display. Unlike other models, this one works exclusively in connection with a proprietary application via a Bluetooth connection.
CoolWallet S
A younger version from the manufacturer CoolWallet, in the form of a completely waterproof credit card. It is battery operated and comes complete with a special charging station.
Connects to devices running iOS and Android using a Bluetooth connection through the company’s mobile application. Supports fourteen blockchains as well as working with NFTs. Exchange of certain tokens is possible, as well as their staking.
CoolWallet Pro
The older model of the CoolWallet line, which has all the properties and advantages of the previous device. However, it is able to interact with more than thirty networks. In addition, it has a higher level of protection against hacking.
Keystone 3 Pro
One of the most advanced cold wallets on the market, offering a huge number of security features. It looks like a small smartphone with a four-inch screen and a camera. Supports over two hundred blockchains via third-party hot wallets. For example, MetaMask, OKX Wallet and UniSat. Basic security methods include entering a password and scanning a fingerprint, but there are more advanced variations.
How to set up and use a cold wallet?
Each hardware wallet has its own setup procedure, but in most cases the steps are similar. Usually, together with the device itself, the user also receives a short instruction for its first launch. It is quite clear to follow all the steps listed in it.
As a rule, at the beginning of work, you need to connect the wallet to a personal computer through a wired connection and configure it through a proprietary application. Sometimes this procedure can take place on a smartphone or on the device itself.
Anyway, the main step is saving the seed phrase. It will be needed if the user forgets the password for unlocking the device or loses it.
In this case, with the help of a combination of twelve to twenty-four English words, you can restore access to it. Be sure to write them down and keep them in a safe place in case of a similar situation. Only the owner should know about the location, so that criminals cannot gain access to the user’s funds.
It is important to note that each hardware wallet offers a different set of features. It necessarily includes sending and receiving tokens. Most often, it can also be used to interact with decentralized applications.
In addition, some solutions allow you to deposit tokens in staking, as well as work with NFTs.
Advantages and disadvantages of cold wallets
Cold wallets offer the highest level of security. The main work takes place in a proprietary or third-party app, while the device itself is used to approve transactions. Thanks to this, attackers will not be able to gain complete control over the device. Only if they have physical access to it.
In other cases, a user who follows simple safety precautions will not be harmed. However, if he does not check the applications to which he gives access, such products will not save him from losing money. The same applies to the seed phrase. Its dishonest storage can lead to deplorable consequences.
It is worth noting that the hardware device is mainly aimed at long-term investment due to the need to confirm the transaction every time. For more active work in the field of DeFi, a hot wallet is more suitable, but it has a lower level of protection.
Conclusions
A cold wallet is the best solution for storing assets and eliminating the risk of fraud. Such products are aimed at those who have a large deposit and are not going to use it in any way in the near future. With the correct operation of such devices, the user should not worry about saving his money.
