Cryptocurrency wallets: Cold storage (hardware wallet & paper wallet)

Cem Goksel Ozargun
A free video tutorial from Cem Goksel Ozargun
Blockchain Expert & Instructor, Product & Project Manager
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Become a Blockchain Expert (BE I) | Bitcoin & Cryptocurrency

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07:10:30 of on-demand video • Updated April 2021

  • Bitcoin and how it works
  • Blockchain and how it works
  • Cryptocurrency, coin, token, altcoin
  • Hot wallet vs cold storage
  • Software, hardware and paper wallets
  • Ledger Nano S and how to use it
  • Desktop, mobile and web wallets
  • Public key, private key and address
  • Cryptocurrency mining
  • Hash rate and hash power
  • ASIC mining devices
  • Methods of cryptocurrency mining
  • Mining pools and how to choose the best
  • What you need to mine cryptocurrencies
  • Profitability calculation in mining
  • Cryptocurrency exchanges and how to choose the best
  • How to buy cryptocurrency from Binance
  • How to transfer cryptocurrency from Binance
  • How to earn money from buying and selling cryptocurrencies
  • How to create an Ethereum wallet on MyEtherWallet
  • How to send and receive Ethereum on MyEtherWallet
  • Market order, limit order, conditional order
  • Bid and ask, maker and taker
  • Bitcoin block and its contents
  • Digital signature and its use
  • Hashing and hash function
  • How money evolved into bitcoin
English In this lecture, we are going to talk about cold storage, a sub-category of cryptocurrency wallets, which includes In this lecture, we are going to talk about cold storage, a sub-category of cryptocurrency wallets, which includes hardware wallets and paper wallets. So, after learning about the risks of hot wallets, if you are wondering that whether there is anything you can do to protect your funds against can do to protect your funds against hackers, actually the answer is yes, there is something. There is this option of storing your cryptocurrencies in another type of wallet called offline wallet, or more often called cold storage, which can keep your funds offline and secure all the time. Well, being offline really helps in keeping a wallet safe from hackers because it stores your private key offline, and thus inaccessible to them. Accordingly, using a hardware wallet is what I do to store my cryptocurrencies safely and I would recommend anyone to do the same thing if you value your hard-earned coins. Now, I want to tell you about the two great and useful sub-categories of cold storage called hardware wallets and paper wallets. First of all, as it can be understood from the name, a hardware wallet is a hardware device which store users’ private keys on the device instead of the internet. These wallets normally remain offline but as they are plugged into a computer via a USB cable, they connect to the internet and then they can be used to make transactions. Most importantly, these devices are deemed extremely secure because of the following advantages: Firstly, your transactions are signed offline and your keys are stored offline, so you don’t have to share your private key with a third party. Secondly, the device asks you for your pin code every time you plug it into a computer, so no one else can access your device unless you share the pin code. Thirdly, in order to approve a transaction, the device requires you to click on a hardware button, so a hacker would never be able to get hold of your funds without having physical access to your device first. Also, in addition to their advanced security, another advantage of hardware wallets is that they can support tens of popular cryptocurrencies while most software wallets only support a few. Not to mention that hardware wallets also support interoperability with several software wallets without exposing the private keys, thus allowing the users to go for the software wallets they like without compromising security. wallets they like without compromising security. So, what are the examples of hardware wallets, and how can they be bought? Well, as the most popular examples for hardware wallets, I can say Ledger, Trezor and KeepKey are great. I personally use Ledger Nano S which is a product of Ledger and I believe it is a bit superior than its closest competitor, Trezor. I definitely love this wallet: Ledger Nano S, and I would recommend it to anyone. In fact, in the next lecture, I will explain what it is and how it can be used in detail. If you decide to buy it now or later, keep in mind to buy it from its official website, for which you can find the link in the resources section. Why am I saying this? Because unofficial sellers can tamper with your device and use it to steal your funds. However, even though hardware wallets have many benefits, they also have some cons as well. For example, the price of hardware wallets is a little high, which starts from $85 at a minimum. Also, as cryptocurrencies have got more popular in time, hardware wallets have also recently become a target for thieves as cryptocurrencies have got more popular in time, hardware wallets have also recently become a target for thieves and a few hardware wallets have been reported to be stolen from peoples’ homes. So, no matter how safe hardware wallets may seem, you still wouldn’t want others to steal it from you physically So, no matter how safe hardware wallets may seem, you still wouldn’t want others to steal it from you physically so you should always keep them at a safe location. On the other hand, there is also another type of wallet available as a cold storage option: paper wallet. As it can be understood from the name, a paper wallet is simply a piece of paper that has a copy of your private and public keys printed or written on it. However, sometimes the term also refers to software programs that generate printable private and public keys. To prevent any misunderstanding, throughout the course I will be referring to a paper wallet in its first meaning, as a piece of paper with keys on it. throughout the course I will be referring to a paper wallet in its first meaning, as a piece of paper with keys on it. Anyway, the reason why some people prefer paper wallets above others is because paper wallets provide a high level of security as you can always be sure that they will remain offline until you use them. However, similar to hardware wallets, it is still very important to store paper wallets in a safe place to keep them away from thieves, and it is also essential to have a backup in another location to protect your funds against natural disasters such as fire, flood, earthquakes, etc. So how can you use a piece of paper to make a payment or transfer your cryptocurrencies? Well, actually, as it is not possible to connect a paper to the internet, to access paper wallets, a software wallet is necessary in order to connect it with the blockchain. Most of these software programs come with a QR code reader which lets you to easily scan the QR code on the paper wallet and access your funds. Even if the software program does not support QR code, you can at least input your private key into a field on the program to access your funds as well. To sum up, you can at least input your private key into a field on the program to access your funds as well. To sum up, hot wallets are unfortunately commonly used today although I cannot say they are safe and cannot recommend any of them. hot wallets are unfortunately commonly used today although I cannot say they are safe and cannot recommend any of them. Even though it is estimated that until today, bitcoins worth of more than $30 billion have been somehow lost or stolen, Even though it is estimated that until today, bitcoins worth of more than $30 billion have been somehow lost or stolen, people still continue using hot wallets which consist of a large portion of this amount. So, if you don’t want to be one of those unlucky guys, you definitely should use cold storage, and especially a hardware wallet. But hardware wallets are expensive, so when does it actually make sense to buy a hardware wallet? Well, I have created a simple conditional guide that can tell you whether you need to buy a hardware wallet depending on the size of your portfolio. You can just follow this guide according to your portfolio size and decide whether you need to buy a hardware wallet such as Ledger Nano S. So here is my strategy: If your portfolio is less than $1,000, I wouldn’t recommend buying a hardware wallet as it will cost you a large portion of your portfolio, so stick to software or paper wallets. If you have a portfolio of more than $1,000 and less than $10,000, I would recommend you to order a hardware wallet as soon as you can as it would be very wise to secure such amount of funds by sparing only a small percentage for the device. If your portfolio is between $10,000 and $100,000, I beg you to stop this lecture right now and click on the link to Ledger Wallet’s website in the resources section in order to buy a hardware wallet immediately as it would be very stupid to risk losing that amount of money to hackers, thieves or disasters. Even if you can’t be sure about it right now, make your own research about Ledger Nano S and take the next lecture in which I will be explaining it in detail. Then, I hope you will clear the air and will make the right decision for your own sake. Finally, if your portfolio is larger than $100,000 and you still don’t have a hardware wallet, please donate your funds to me before you lose them to a hacker. Just kidding :) Follow the same strategy as the last one. One more important thing I want to note about wallets before finishing this lecture is that not a single wallet is capable of storing every cryptocurrency. So, depending on which cryptocurrency you want to invest, you should research for all available wallets and you should consider the pros and cons of them depending on whether it is a hot wallet or a cold storage and then decide if you should use that or not. For example, some wallets are designed only to store bitcoin so that if you send other cryptocurrencies to that wallet account, you will lose the funds that you send. to that wallet account, you will lose the funds that you send. So it is very important to check the websites of these wallets to learn which cryptocurrencies they support before you send in your cryptocurrency. In fact, some wallets have been able to advance further and provide support to a wider variety of cryptocurrencies. In fact, some wallets have been able to advance further and provide support to a wider variety of cryptocurrencies. That’s all for now, thank you for listening. In the next lecture, I will be examining the advantages and disadvantages of Ledger Nano S in detail and will teach you the best practices of using it. So, I'll see you in the next lecture.