Bitcoin cold storage
What is cold storage for Bitcoin is one of the most often asked questions due to the rising popularity and people’s need to keep their coins secure.
The storage (or a wallet) safeguards the secret code you need to use your bitcoins and helps manage transactions, something like an 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.
Bitcoin cold storage refers to keeping a reserve of Bitcoins offline. This is often a necessary security precaution, especially dealing with large amounts of Bitcoin. It is considered the safest way to protect your stash.
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 very important for you.
How to store Bitcoin offline in cold storage includes several methods: on a USB drive or other data storage medium in a safe place, on a paper wallet, on a bearer item, such as a physical “Bitcoin” coin, or using an offline hardware wallet.
Figuring out how to setup Bitcoin cold storage depends on the method you choose. If you want to use paper, check out our guide on making a paper wallet. If you’ve bought an actual hardware wallet, such as Ledger Nano or Trezor, follow the instructions that came with it.
In contrast, online, or “hot”, wallets are less secure due to the threat of hacking. Website wallets are especially vulnerable as you must reveal your private key to a third party. But hot wallets are more convenient for daily use.
It’s thus recommended to use both types of wallets – hot wallets to hold small amounts of bitcoin for daily transactions, and cold, or offline, wallets for storing larger sums. In any case, you can have as many wallets as you want.
And here you can find more information on how to evaluate a specific wallet.
For more information on how to keep your coins safe, read our guide.