What is Cold Storage?

– by Tanish Mittal

Have you ever seen someone dancing and celebrating because they found some old USB of theirs? Well, that USB might not be as ordinary as you think. Maybe it’s holding a million dollars worth of Bitcoin. That’s what is called ‘Cold Storage’.

Cold storage is a physical device that keeps your cryptocurrency totally offline, avoiding the risk of getting hacked or stolen.

Although using a cold wallet makes hacking considerably more difficult, it is still possible. If you acquire your hardware wallet secondhand, make sure it’s from a manufacturer since the device might have been altered in a way that makes it susceptible, DeCicco cautions.

If you want to acquire and store cryptocurrencies for a long time, cold storage may be the better option. However, if you want to purchase and sell cryptocurrencies, or if you’re not completely sold on it and believe you’ll want to cash out your holdings after a time, a hot wallet — or even leaving it on an exchange — may be a better option.

One Wallet Safer Than the Other?

Cold wallets are more secure than hot wallets since they are offline devices that aren’t linked to the internet. Other trade-offs, however, must be taken into account.

If you’re concerned about losing track of a tangible item, such as a wallet, a hot wallet could be a better option. Hot wallets are commonly linked to cryptocurrency exchanges, making moving your holdings easier than with a cold wallet.

Both types of wallets are typically seen to be safer than holding cryptocurrency on the exchange where you purchased it, but like with any investment plan, there are several considerations to consider.

Different types of Cold Storage options for Cryptocurrencies

• Hardware Wallets for Cryptocurrency (safest)
• Paper Wallets
• Desktop Wallets
• Cryptocurrency Storage on a USB Drive

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