Cold storage is a physical device use to store digital assets offline. It is suitable for users who often handle/own a significant amount of digital currencies, for those who look for another layer of high security of their assets, or for crypto owners who have an intention to hold those possessions in a long term period.
It is a preferred choice to keep your currency, but not mandatory required. You can find several methods in the market offering cold wallet storage as listed below:
- USB drive: storing an encrypted private key² by using reliable third-party encryption software
- Paper wallet: a printed private key kept in physical places like a vault
- The bear item such as physical crypto (i.e. physical Bitcoin): unlike paper wallet, the private key is embedded in a physical “coin.”
- Offline digital currency Hardware wallet: storing private keys and signing transactions offline
¹ For more information, please visit Investopedia - Cold Storage
² The "Private key" is a wallet address that records both incoming and outgoing transaction logs.