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What is cold storage?

Cold storage in the field of holding and investing in Bitcoin and other cryptocurrencies means storing the private key of the desired currency offline and without connecting to the Internet. This type of protection prevents hackers and malware from accessing the property. This method is very effective for long-term investments.

Private keys connected to the Internet are not safe from thieves. This private key storage is called a HotWallet. Cold storage easily solves this problem. In fact, signing a transaction in an offline environment reduces the possibility of thieves gaining access to a private key. Therefore, even if the thief eavesdrops on the transaction, given that there is no direct access to the key, the data is transmitted with complete security. Of course, this security comes at the expense of the difficulty of implementing the steps and more time of signing the transaction.

A paper wallet is the simplest type of wallet in which public and private keys are written. Pipers have a QR code that can be scanned to allow the user to sign their transaction. Asset security will be compromised if this paper is destroyed or photographed.

Hardware wallet is another type of cold wallet that uses an offline tool such as a flash drive or smart card to create and maintain a key. Ledger, TREZOR, Keepkey wallets are of this type.

Another type of cold wallet is an offline software wallet. In this type of storage, the bag is divided into two parts. An offline bag containing a private key and an online bag containing a public implementation key. In the online part, the initial transaction is created and transferred to the offline part for signing, and finally to the Broadcast network. Due to the fact that the offline bag is never exposed to the network, the security of the key will remain. Electrum and Armory are of this type.

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