Cold Storage: Secure Preservation of Crypto Assets

Cold Storage is offline storage of cryptocurrencies, usually using hardware non-custodial wallets, USB, offline computers or paper wallets.

What is cold storage?

Cryptocurrency wallets that are used to receive, store and send cryptocurrencies are commonly divided into two categories:hosted (hot) wallets and cold wallets. Hosted wallets, called hot wallets, are software that can be accessed through the wallet provider website, and they are a more common option due to their ease of use, convenience and constant availability.

One or more private keys (for single-signature or multiple-signature wallets, respectively) are used to provide access to the funds stored in the wallet. In the event that private keys are compromised, for example, as a result of theft or phishing attack, funds stored in a wallet can be stolen and lost forever. Their original owner in this case has almost no legal recourse, because blockchain transactions are irreversible and the identities of cryptocurrency users are anonymous.

A cold storage system guarantees an additional level of protection of user funds by physically disconnecting it from unprotected networks, primarily from the public Internet when it is not in use. If a cold wallet is physically located in a secure location, potential attackers cannot access the coins stored on it.

Cold storage is used by both individuals and companies whose business model involves storing customer funds, such as cryptocurrency exchanges. There are now many different methods of cold storage, but the most popular are paper wallets and hardware wallets. A paper wallet is simply a physical piece of paper with the wallet’s public and private keys printed on it. A hardware wallet is a specialized device, such as a USB drive, that must be physically connected to a computer in order to access the funds.