Clear DefinitionsCold Storage
1 min read
Pronunciation
[kohld stoj-rij]
Analogy
Cold storage is like storing gold in an underground vault—it’s inaccessible to thieves unless they breach physical security.
Definition
The practice of keeping private keys entirely offline in secure environments—hardware devices, paper, or air‑gapped systems—to protect against online attacks.
Key Points Intro
Cold storage protects assets through:
Key Points
Air‑gapping: No network connectivity ever.
Physical security: Secure location, safe, or deposit box.
Redundancy: Multiple geographically separated backups.
Controlled signing: Transactions only signed in secure environment.
Example
An institution stores large Bitcoin holdings on offline hardware wallets in a bank vault, with seed phrases split via Shamir’s Secret Sharing among trustees.
Technical Deep Dive
Cold storage uses multi‑sig hardware wallets or BIP‑39 seed backups. Signing follows PSBT workflow: offline device loads PSBT, signs inputs, exports signed PSBT for broadcast. HSMs provide enterprise‑grade key custody.
Security Warning
Physical compromise (theft, fire) can destroy cold storage; implement multi‑location backups and environmental protections.
Caveat
Operational complexity and cost; not suitable for casual users or small amounts.
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