Cryptocurrencies are an amazing technology touted as the best alternative to physical cash. However, the world of cryptocurrencies can be scary, with numerous reports emerging in recent years of wallets and exchanges wiped out by malicious actors. The proposed solution to this is self-hosted cold wallets. But what if you want to go further and ensure an impenetrable crypto wallet? One solution for people seeking such an option is an air-gapped crypto wallet.
What Are Air-gapped Crypto Wallets?
These are cold storage wallets that do not have any wireless connection capabilities. While the best crypto hardware wallet is highly secure and provides options like near-field communication, Bluetooth connections, and other wireless connectivity options for users’ convenience, air-gapped wallets do not have any of that.
Because they do not connect to the internet or any networks, these wallets are minimally interactive devices that provide the best security for your funds and private keys. This level of isolation makes them immune to threats like malware, hackers, and phishing attacks.
The Tradeoff
All the above sounds great for security-conscious people, but what is the tradeoff? Because these wallets never connect to the internet or wireless networks, signing transactions is complicated.
Completing a Transaction
A transaction or transfer starts with preparation. You need to create a transaction on a device that connects to the internet. Once you have details like the amount and address ready, the only thing left is to sign the transaction.
The wallet creates a “watch only” entity that can transfer a readable file to a MicroSD card. The file is in the form of a Partially Signed Transaction that you can open on the air-gapped wallet and sign using your private keys.
The wallet then creates another file indicating the transaction is signed and ready. You then transfer this file to a connected device using an SD card and load your online wallet. A broadcast then happens, and the transaction is complete.
The above is a high-level overview of how transactions on air-gapped crypto wallets work. The exact details will depend on the device and the cryptocurrencies you would like to transfer or trade.
Signing Transactions Using QR Codes
Some air-gapped crypto wallets also let you sign transactions using a QR code. The wallet creates one that you are supposed to scan using your phone or other compatible device. The QR code contains signed data that you can decipher to extract the transaction.
The QR codes generated do not ask the scanning device to connect to the internet but instead transmit the signed status. For this reason, they retain the “air gap” and are just as secure as using an SD card.
Long-term Storage
An air-gapped crypto wallet is an excellent option if you would like to store your cryptocurrency for a long time. You have complete peace of mind that no one can access your digital currencies or do anything with them because there is no way to access them without the wallet.
Crypto enthusiasts who want the highest level of security may wish to consider air-gapped wallets. The tradeoff is that transactions will be slower and more complicated, but that is a reasonable tradeoff for the peace of mind these wallets give you.