Cold storage is an offline wallet used for storing cryptocurrency. With cold storage, assets are stored on a platform/device that is not connected to the internet, thereby protecting the wallet from unauthorized access, cyber hacks and other vulnerabilities to which a system that is connected to the internet is susceptible.

How Does It Work?

There are two types of keys (strings of cryptographic data) for cryptocurrency: a public key and a private key. The public key identifies the specific crypto wallet during transactions. The private key is the code that allows the owner to access the crypto in the wallet.

To move your crypto to a cold wallet, you first connect it to your computer. Next, you choose the option to receive crypto, which will generate an address. You can send your crypto to this address to store it on your cold wallet. The device has both your public and private keys, so once you disconnect it from your computer, that information is completely offline. With cold storage, your keys are kept offline except during the transaction process.

Why Cold Storage

The primary reason for using cold storag is security. Although hot wallets are secure as well, they are more susceptible to being hacked.