“What is Bitcoin cold storage” is one of the most frequently asked questions. Due to the rising popularity of Bitcoin and cryptocurrencies, a growing number of people are seeking to keep their coins secure, and Bitcoin cold storage is one of the most secure solutions.
What is Bitcoin cold storage?
When you picture a Bitcoin cold storage, you may see a modern, cutting-edge fridge hidden somewhere in a top-secret bunker. However, Bitcoin cold wallets, much to the disappointment of some, are mere paper notes, things or devices that are kept offline. They take the form of hardware wallets, paper wallets, USB sticks, encrypted data storage devices, and even physical bearer items. The fundamental rule for a wallet to classify as a Bitcoin cold storage is the capability to store Bitcoin private keys and keep it offline so that one can steal it over the internet.
The storage (or a wallet) safeguards the secret code you need to use your Bitcoins and helps manage transactions, something like a private internet banking account. The code, which serves as a password, is called a “private key” and is vital to the security of your money. Anyone who gets your private key can steal your Bitcoins. And if you lose your key, your Bitcoins are gone, too. So it’s important to protect private keys against accidental loss and back them up.
So, Bitcoin cold storage refers to keeping a reserve of Bitcoins offline. It is often a necessary security precaution, especially if you deal with large amounts of Bitcoin. It is considered the safest way to protect your digital assets.
When you should use a cold wallet
Consider an offline (aka “cold”) wallet for storage if:
— You need to store a large amount of Bitcoin and security is a top priority;
— You don’t need to use it often or access it anytime, anywhere;
— You prefer to safeguard your funds yourself rather than trust a third party;
— You’re ready to pay for hardware (typically from about 50 to a couple hundred dollars);
— Privacy is important to you.
Storing Bitcoin offline in cold storage gives you plenty of flexibility. You can use a USB drive or other offline data storage medium stored in a safe place, a paper wallet, a bearer item, like a physical “Bitcoin” coin, or purchase a dedicated offline hardware wallet.