I was at a crypto conference a few months ago and I won a crypto wallet of my very own. Wow! I thought, this will be a great way to get my feet wet and make my first trade. I quickly realized that I had NO idea what to do with this thing.
Ok, before I went any further I had to go backwards…again. I did some research on the wallet and realized that it’s a cold-storage wallet. What is that you might ask? Well it means that I can store my bitcoin or altcoins offline to keep them safe from the internet. The wallet stores the private keys of the bitcoin owner which they need if they are going to make any transactions. I have read that you should never keep large amounts of coins on your account in any any exchange in case the site gets hacked. Cold storage resolves this issue by signing the transaction with the private key in an offline environment. Because the private key does not come into contact with a server during the transaction signing process and is done offline, the risk of hacking goes down substantially.
There are other types of wallets that you can use, each with different risks:
More on that here.
I also read that there are some risks with cold storage wallets as well, but it does seem to be the best option for the person looking to hold on to their coins for a while and feel a sense of protection while through the learning process. My wallet says that it’s fire and flood resistance so that makes me feel better as well. I think I’m now ready to take the plunge to make my first trade.