What is Cold Storage?

What is Cold Storage?

Cold Storage is achieved when bitcoin private keys are created and stored in a secure offline environment. Cold storage is important for anyone with bitcoin holdings. Online computers are vulnerable to hackers and should not be used to store a significant amount of bitcoins. The most common types of cold storage are hardware wallets and paper wallets.

Hardware Wallets

Hardware wallets are probably the most common means of storing bitcoins offline with quick and easy access for both sending coins when needed and capable of easily receiving additional coins while still preserving privacy. Most, if not all, hardware wallets are equipped with something called Hierarchical Deterministic (HD for short) functionality. HD wallets allow hardware wallets to create multiple addresses from a single starting point known as a seed or seed phrase.

This seed is usually a collection of 12 random words that can be written down on paper to restore your wallet if you ever want to erase your hardware wallet to sell or if you just want more security. In doing this, the user creates a form of paper wallet. KeepKey is one hardware wallet that is capable of doing this.

Paper Wallets

Paper wallets are a more static form of cold storage. They have much less flexibility than hardware wallets because each paper wallet only has one public key and one corresponding private key. Technically a paper wallet can receive bitcoins more than once but each and every additional payment to the same address erodes the privacy of not just the user but of the entire bitcoin network.

Paper Wallets are more like a savings account that you do not want to access after you have made your initial deposit. Since paper wallets can be printed on a whim, you can print a new wallet every time that you want to receive and store funds. To remove funds from a paper wallet, you will need a way to import or sweep the private key with a mobile wallet like bread wallet or an online wallet like blockchain.info.

Piper Wallet

Piper Wallet is a Raspberry Pi based paper wallet printer (Piper is a combination of Pi and Paper) that lives entirely offline for increased privacy and the ability to print paper wallets a the push of a button. If a paper wallet has never been online, then the private key can never be compromised by a hacker.

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