In cryptocurrency, cold storage means keeping private keys on a device that is completely disconnected from the internet. This eliminates the primary attack vector for theft, remote hacking. Cold storage methods include hardware wallets (dedicated USB devices like Ledger or Trezor), paper wallets (printed QR codes of private keys), and air-gapped computers that never connect to a network. The tradeoff is convenience. Moving funds from cold storage requires physically connecting the device or manually entering keys, which adds friction compared to hot wallets. Most security-conscious holders keep the bulk of their assets in cold storage and only a small working balance in a hot wallet, similar to keeping savings in a vault and spending money in a checking account. Exchanges and institutional custodians use cold storage for the majority of customer funds.
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