Why You Should Keep Your Crypto in Cold Storage
The cryptocurrency market has experienced exponential growth over the last decade. With that growth, the importance of security measures to protect digital assets has become paramount. One of the most effective security measures for safeguarding cryptocurrencies is the use of cold storage. In this blog, we'll delve into why you should keep your crypto in cold storage and provide examples of how some have lost their fortunes due to exchange breaches.
What is Cold Storage?
Before we jump into the reasons, let’s first understand what cold storage is. In simple terms, cold storage involves keeping your cryptocurrency private keys completely offline. This can be achieved through hardware wallets, paper wallets, or air-gapped (disconnected) computers. The main advantage of cold storage is that it's immune to online hacking attempts, as the keys are never exposed to an internet-connected device.
Why Cold Storage?
1. Protection from Exchange Hacks
The history of cryptocurrency is riddled with stories of exchanges getting hacked and users losing their funds.
- Mt. Gox Incident (2014): Once the largest Bitcoin exchange in the world, Mt. Gox filed for bankruptcy after revealing that 850,000 Bitcoins (worth over $450 million at that time) were missing from its wallets. Investigations revealed a long-standing vulnerability in the system that was exploited by hackers.
- Bitfinex Hack (2016): Hackers managed to steal approximately 120,000 Bitcoins (worth about $72 million then) from multiple user wallets on the Bitfinex exchange. The exchange had to distribute the losses across all its users, leading to a 36% loss for every account holder.
- Coincheck Heist (2018): Japan's Coincheck exchange suffered one of the most significant cryptocurrency thefts when hackers stole NEM tokens worth more than $530 million. The exchange had kept these assets in a hot wallet, which was vulnerable to such attacks.
- FTX (2022): FTX, a cryptocurrency exchange, collapsed over a 10-day period in November 2022 due to a liquidity crisis and mismanagement of funds. The collapse caused the crypto market to lose billions, and FTX's CEO resigned while the company filed for bankruptcy. The collapse also resulted in a possible hack in which hundreds of millions worth of tokens were stolen, and FTX's founder and ex-CEO, Sam Bankman-Fried, was arrested and extradited to the United States.
2. Protection from Phishing and Malware
Online wallets and exchange accounts can fall victim to phishing attacks. Unsuspecting users often get lured by fake websites or emails and end up revealing their private keys or login credentials. With cold storage, since your private keys are never online, they remain safe from such threats.
3. Guarding Against Exchange Shutdowns or Regulatory Actions
Sometimes, exchanges can suddenly shut down, either due to financial difficulties, mismanagement, or regulatory clampdowns. In such cases, users might lose access to their assets. With cold storage, you maintain complete control over your crypto, irrespective of the operational status of any exchange.
4. Peace of Mind
Knowing that your crypto holdings are safe from the ever-present threats of hacks, scams, and phishing attempts brings an invaluable sense of security. With cold storage, you have that peace of mind, knowing that your assets are secure and under your control.
MRLA Media Recommends the Ledger Nano X Cold Wallet for Optimal Cryptocurrency Safety
In the ever-evolving realm of cryptocurrency, safeguarding assets remains a paramount concern for investors and enthusiasts. Recognizing this, MRLA Media, a trusted voice in the digital sphere, wholeheartedly recommends the Ledger Nano X Cold Wallet as a top-tier solution for cold storage, ensuring users maintain both accessibility and security for their digital assets.
Cryptocurrencies represent a new frontier in finance and investment. Just as you wouldn't leave your physical gold bars on a park bench, it's essential to take proactive measures to protect your digital gold. Cold storage offers one of the most robust security mechanisms available for crypto assets.
The stories mentioned above serve as stark reminders of the risks involved when trusting third-party platforms with our digital wealth. By taking control of our cryptocurrencies and using cold storage solutions, we significantly reduce the risks associated with online threats and uncertainties in the rapidly evolving crypto space.