Cold wallet (cold storage)
Also called: cold storage · offline wallet
Definition
A cold wallet is a way of storing crypto where the private keys are generated and kept offline, away from internet-connected devices, so remote attackers cannot reach them.
How cold wallet works
Cold storage covers hardware wallets, air-gapped computers or phones that never go online, and paper or metal backups of keys. The coins still sit on the blockchain; what is cold is the key that signs transactions.
To spend from cold storage you create a transaction, sign it on the offline device, and then broadcast it from an online device. This extra step is the point: even if your laptop is infected, the key never touches it.
Exchanges use cold storage too, often with multisig and several people needed to approve a movement. For individuals, cold storage is best for long-term holdings. The main risks shift to physical ones: loss, fire, theft of the backup, or forgetting where it is.
Example
Imagine you hold 1.5 ETH that you do not plan to touch for two years. You keep 0.1 ETH in a phone wallet for gas and small swaps and send 1.4 ETH to a hardware wallet, with the 24-word backup stamped on a steel plate in a separate place from the device. If your phone is hacked, the attacker can reach 0.1 ETH but not the 1.4 ETH, because signing those coins requires the physical device and its PIN.
Common mistakes
- Calling a wallet cold while its seed phrase is stored as a photo on an online phone.
- Keeping the device and its only backup in the same drawer.
- Never testing a restore from the backup before relying on it.
Learn and practise
FAQ
What is the difference between a hot and a cold wallet?
A hot wallet keeps keys on an internet-connected device, while a cold wallet keeps them offline. Hot is convenient for daily use, cold is better for savings.
Can a cold wallet be hacked?
Remote attacks are much harder, but you can still lose funds by signing a malicious transaction, revealing the seed phrase, or buying a tampered device from an unofficial seller.