Is One Cold Wallet Really Enough?
Not your keys, not your coins.
Every crypto holder must be familiar with this quote. The recent run on FTX, a top crypto exchange, due to the revelation of fund misappropriation once again reminded us of the fact that “not your keys, not your coins.” To this day, a large number of users and institutions still cannot withdraw their funds on FTX. Although many people would advise you to enhance asset security by adopting a cold wallet, but is it the perfect solution to the problems of asset management?
What are cold wallets?
In our previous article titled Must-know Concepts About Crypto Wallets, we mentioned that crypto wallets are tools used to store our private keys, and there are cold wallets and hot wallets depending on how the private key is stored.
Hot wallets, also known as online wallets, refer to wallets connected to the Internet. For instance, most web wallets, wallet extensions, and wallet apps are all hot wallets. Such wallets promise great ease of use, and we can transfer cryptos and use DApps on webpages and smartphones at any time.
Cold wallets, or offline wallets, are the opposite of hot wallets. They are wallets used without an internet connection. Without access to the Internet, they minimize the risks of hacking. Many crypto users think that cold wallets are just another name for hardware wallets, which isn’t true because, for instance, a wallet generated on a smartphone without an internet connection through CoinEx Wallet is also a cold wallet. By the same token, generating the private key on an offline PC and copying that private key on paper also creates a cold wallet.
Should I choose cold wallets or hot wallets?
Many people go for cold wallets without doing much thinking because they believe that offline wallets are safer, but cold wallets are not designed for all scenarios. For instance, as the private key is not exposed to the Internet, users of a cold wallet must conduct internal, offline authentication through a special device or grant authorization via the offline signature function of an offline phone.
Such operations are troublesome, especially if you use DApps on a daily basis. As such, cold wallets can only meet the needs of long-term crypto holders who only trade cryptos once in a while. If you are a big crypto holder and frequently use DeFi or buy NFTs, a better choice is to store most cryptos in cold wallets while keeping part of liquid funds in hot wallets.
Choosing a safe and reliable hot wallet is also essential. As a decentralized wallet featuring multiple chains and cryptos, CoinEx Wallet offers twofold protection with the security password and protects mnemonics via encrypted backups, which effectively keeps the private key and mnemonics safe and secure. For more information about CoinEx Wallet’s security functions, please refer to CoinEx Wallet: Keeping Your Cryptos Secure Through Multiple Layers of Protection.
Using wallets in safer ways
Adopting a suitable wallet is not a once-and-for-all solution. Although decentralized wallets such as CoinEx Wallet help users mitigate risks through sound product design, as blockchain is inherently decentralized, such wallets offer full control of the assets to users themselves, which means that users must also adopt security measures to stay safe.
When using crypto wallets, be sure to remember the following tips:
1、You should always download the App from the official website, and do not download wallet applications from non-official websites;
2、Remember to make multiple offline back-ups of your private key or mnemonics, and do not disclose them to any third party or reveal such sensitive information on online platforms such as live chat software.
3、You’d better become more security-aware. For example, you can enhance your asset-protection measures by reading the relevant articles in CoinEx Wallet Blog, which regularly releases security know-hows.
In the blockchain world, asset security is always the No.1 priority. Although cold wallets are excellent tools for enhancing security, actual asset management is not that simple, and we can avoid potential asset losses by using crypto wallets in safer ways.
