What Is A Cold Wallet

A cold wallet is a type of crypto wallet which allows users to store their digital assets offline.  

How It Works  

Cryptocurrency wallets are divided into 2 broad categories; hot wallets and cold wallets. Traders and investors commonly make use of crypto exchanges in transactions and these platforms typically double as wallet providers, allowing customers to deposit their virtual assets.

The biggest drawback to this is that exchanges mostly provide hot wallets, these are digital wallets that are constantly connected to the internet. Due to this, hot wallets are generally regarded as unsafe as being online renders them open to breaches.

While hot-wallets are more user-friendly, cold wallets are far more secure, they do require a certain degree of knowledge to set up but it is considered worth it as they are the safest way to store crypto assets. Cold wallets are also referred to as cold storage.   Technically, digital wallets do not hold cryptocurrencies, assets are stored exclusively on the blockchain; what the wallets contain are private keys holders can use to access their crypto funds. Private keys can be described as cryptographic passcodes, they also function to sign off on purchases and denote ownership of a crypto address. A cold wallet stores all of this information, the signing keys, and user crypto addresses in offline hardware devices.

Types of Cold Wallets  

Cold storage wallets are split into 2 kinds;

● Hardware wallets  

These are physical devices similar to USBs that are used to store a user's private keys. Cryptocurrencies are transferred from a hot wallet to the hardware wallet’s public address. Conducting transactions with a hardware wallet can be tricky as the user would have to connect it to a device such as a computer, they would have to access the associated software and confirm the transaction using their private keys, however, the whole deal takes place offline.

● Paper wallets  

This is the simplest form of cold storage, it is composed of a piece of paper containing a user’s private keys. It is incredibly secure as the holder’s assets can only be accessed via these keys which could either be written down, printed out, or generated as a QR code on a piece of paper. The paper must of course be kept in a place where it cannot be stolen.

Several platforms have begun offering cold wallet storage, a good example of this is Bitcoinztech a crypto savings platform where customers can safely store their assets while making passive earnings. The platform also allows users to deposit their cryptocurrency in offline wallets making it one of the best choices for long-term hodling.