Cold storage is a method of storing cryptocurrency, in which the keys to access the account in the network are stored in offline mode. It is the most reliable way for long-term secure storage of any cryptocurrency.
The coins themselves are stored in the cryptocurrency blockchain. A wallet is a user interface for authorization in the blockchain. It stores and uses an array of key pairs for your convenient access and use of your account funds. Safe storage of cryptocurrency does not mean secure storage of the wallet, since the wallet is nothing more than an interface for manipulating blockchain and key pairs. Access security is provided by secure key storage.
Different wallets store keys in different places, but as a rule, it will be an encrypted binary file wallet.dat or something similar. Here you need to read the documentation on the wallet. As a rule, exporting this file is possible from the wallet program itself, and you can always simply copy it from the file system.
Cold storage means not only disconnecting the computer from the Internet, but also simply storing the key file on a separate storage from the computer, for example, on a flash drive. In this case, the working key file is deleted from the computer, and no one can take your money, because no one will have your keys.
Types of Wallets
If you want to safely store cryptocurrency, then you need to know what are the wallets, and which of them can be used for cold storage:
- Online wallets — are stored on servers on the Internet and used through the browser. Cryptocurrencies are not suitable for safe storage. It is very convenient to use for everyday calculations.
- Local wallets — the wallet program is downloaded to the local computer. Not all are suitable for cold storage. Are divided into:
2.1. Full-fledged — with its full local copy of the blockchain (the entire database is downloaded to the local computer). Suitable for cold storage.
2.1.1. Official — the owners of cryptocurrency with their blockchain are always developing and a wallet (or several) for access. They are directly interested in the safety of user funds.
2.1.2. Third-party wallets — various, convenient, single or multi-currency, with a pleasant graphical interface, a lot of additional functionality. But not secure enough, because your keys will be available to programs that can potentially transfer them to wallet developers.
2.2. Lightweight is a local wallet, but it uses someone else’s copy of the blockchain located on the server in the Internet. They allow storing keys locally and do not require blockchain loading, but they are not secure enough due to the use of foreign servers.
- Hardware wallets — specialized key storage devices with access protection. Depending on the model, they can use either a local blockchain or connect to the server. Less secure than full-fledged official local wallets, but safer than all other types of wallets, because the reputation of the manufacturer is at stake.