What Is A Cold Wallet? And Why Is It Important?

A cold wallet is a wallet which is completely offline and used for storing cryptocurrencies. It is also known as cold storage.

Prasanna Peshkar

Prasanna Peshkar

March 12, 2020 1:12 PM

What Is A Cold Wallet? And Why Is It Important?

A cold wallet is a wallet which is completely offline and used for storing cryptocurrencies. It is also known as cold storage. It seems like not a day goes by without discovering about how cryptocurrencies are lost due to a hack or losing credentials. The security of cryptocurrencies has never been more important. Cryptocurrencies, unlike most conventional currencies, are digital currencies. Thus, the path to such kind of currencies is entirely different, particularly when it comes to collecting and storing it. As cryptocurrencies don’t exist in any physical form or structure, they can’t technically be saved anywhere. Instead, the use of private keys allows users to access their public cryptocurrency location and sign for transactions that require to be securely saved. A sequence of the recipient’s public key and the sender’s private key is what makes a digital currency transaction plausible. There are various distinct forms of crypto wallets, providing various elements and modifying in terms of safety and security, comfort, approachability and so on. One of them is cold wallet i.e cold storage. Let’s take a look at what exactly a cold wallet is and why is it important.

Hacking the planet

In the month of July 2018, cryptocurrency exchange Bancor had suffered ‘security breach,’ theft of $13.5 million worth of digital tokens. Israeli company founded in 2017 said a cryptocurrency wallet on its network had been breached and $12.5 million worth of ethereum and $1 million worth token Pundi X have been stolen.

in the month of June 2018, Bithumb, the world’s sixth-largest cryptocurrency exchange, suffered a devastating hack with thieves stealing over $30 million worth of cryptocurrencies from its platform. It is really important for cryptocurrency enthusiast to store their cryptocurrency safely and securely.  The cold storage plays an important role in protecting from cryptocurrency hacks.

What is a Cold Wallet?

A cold wallet is a cryptocurrency-wallet that is not connected to the internet. It is much more secure than a hot storage. Hot wallets are connected to the internet, therefore vulnerable to hacking. Holding large sums in hot wallets is the equivalent of taking huge amounts of cash in person. Cold wallets, such as Trezor and Ledger Nano S, are devices which can be as tiny as a USB stick and can be stored offline.

Cold wallets are the safest devices to store cryptocurrencies precisely because the coins are saved offline. If users don’t require access for months or years, a cold wallet is the reliable option as long as it is handled properly. There are two alternatives when it comes to cold storage, paper and hardware wallets.

Paper wallets: As the name suggests, this is the wallet which is just a piece of paper. In the common particular sense, a paper wallet is a record comprising the data necessary to produce any number of cryptocurrency private keys and constructing a wallet of keys. In any case, people commonly utilize the term to mean any system for putting away cryptocurrencies detached as a physical record. Unlike hot wallets and hardware wallets, there’s no way one can retrieve someone’s private key if they lose it. Or if the paper wallet gets damaged in a house fire, users lose their money. Paper wallets have single use only, so they are good for storing long-term money.

Hardware wallets: A hardware wallet is a tool that is not connected to the internet. It is like a remote device that connects to the internet when users need it to send or receive payments and disconnects when the transaction is executed. It confirms transactions through the private keys which are saved offline. It also enables users to retrieve their funds using a backup seed key if the device is broken or lost.

Following is the list of cold wallets


It connects to pc and mobile device via USB. It supports more than 9 cryptocurrencies. Trezor’s settlement with Myetherwallet makes it easy to move ERC-20 tokens over to cold storage. It allows two-factor verification and an access to restore private key if users lose it.

Key features:

Ledger Nano S

Ledger has its own way of saving ethereum and ERC-20 tokens. Users have to install a separate app for each coin they want to store.

Key features:




KeepKey operates with the wallet software on users’ computer by taking over the control of private key creation, private key storage, and transaction signing.

Key features:

No matter which cold wallet users choose, they should always remember that cryptocurrencies are only safe if the private key is generated securely, remains a secret, and–most importantly–is controlled only by USERS!

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Prasanna Peshkar
Article By

Prasanna Peshkar

Prasanna Peshkar is a seasoned writer and analyst specializing in cryptocurrency and blockchain technology. With a focus on delivering insightful commentary and analysis, Prasanna serves as a writer and analyst at CryptoTicker, assisting readers in navigating the complexities of the cryptocurrency market.

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