More Examples
“Most of my bitcoin is in cold storage in my hardware wallet.”
“I could keep my stack on the exchange, but I prefer cold storage.”
“They hacked the exchange and emptied the hot wallets but the cold storage was safe.”
Definition(s) from the Web
- Cold storage in the context of Bitcoin refers to storing Bitcoins offline and spending without the private keys controlling them ever being online. This resists theft by hackers and malware, and is often a necessary security precaution especially dealing with large amounts of Bitcoin. For example, a Bitcoin exchange which offers an instant withdrawal feature, and might be a steward over hundreds of thousands of Bitcoins. To minimize the possibility that an intruder could steal the entire reserve in a security breach, the operator of the website keeps the majority of the reserve in cold storage, or in other words, not present on the web server or any other online computer. The only amount kept on the server is the amount needed to cover anticipated withdrawals in one day. Special-purpose hardware wallets are also a kind of cold storage solution but this article will mostly deal with cold storage using general purpose computing hardware. Source
- Cold wallet or cold storage wallet is the hardware device to store Bitcoin or other cryptocurrency offline. It is the most secure way to store cryptocurrency. There are popular cold wallets – Trezor, Ledger Nano S, ELLIPAL Titan Cold Wallet. This is often a necessary security precaution, especially dealing with large amounts of Bitcoin. For example, a Bitcoin exchange typically offers an instant withdrawal feature, and might be a steward over hundreds of thousands of Bitcoins. To minimize the possibility that an intruder could steal the entire reserve in a security breach, the operator of the website follows a best practice by keeping the majority of the reserve in cold storage, or in other words, not present on the web server or any other computer. The only amount kept on the server is the amount needed to cover anticipated withdrawals. Source
- When choosing a wallet, the owner must keep in mind who is supposed to have access to (a copy of) the private keys and thus potentially has signing capabilities. In case of cryptocurrency the user needs to trust the provider to keep the cryptocurrency safe, just like with a bank. Trust was misplaced in the case of the Mt. Gox exchange, which ‘lost’ most of their clients’ bitcoins. Downloading a cryptocurrency wallet from a wallet provider to a computer or phone does not automatically mean that the owner is the only one who has a copy of the private keys. For example, with Coinbase, it is possible to install a wallet on a phone and to also have access to the same wallet through their website. A wallet can also have known or unknown vulnerabilities. A supply chain attack or side-channel attack are ways of a vulnerability introduction. In extreme cases even a computer which is not connected to any network can be hacked. For receiving cryptocurrency, access to the receiving wallet is not needed. The sending party only needs to know the destination address. Anyone can send cryptocurrency to an address. Only the one who has the private key of the corresponding (public key) address can use it. Source
