What is Cold Storage in Cryptocurrency Investing?

Cold Storage in cryptocurrency
Cold storage is not just for food.

Imagine, for a moment, that you have a business buying and selling gold bars. Anybody can just walk in off the street and grab a troy ounce if they feel like it. Obviously, you want to keep the product in stock, but you are keenly aware there is a good chance of getting robbed. So, to protect your business and limit your potential losses from theft, you keep the majority of it well away from the store. In altcoins, that is called “cold storage.”

Cold storage is essentially keeping your altcoins off the internet. You might, for example, store them on a USB drive and disconnect the drive from your computer. Or you might go to a bitcoin ATM and print out a “paper wallet,” which you then throw into a fireproof safe. Either way, your altcoins are impossible for thieves to access. This is how many altcoin exchanges prevent theft; they keep the majority of their coins off the actual internet until needed.

There is, of course, an obvious downside. Paper wallets can be lost or destroyed. Flash drives can get smashed or formatted with viruses right from the beginning. And of course, to use your coins, you have to connect the coins in your cold storage to an internet-connected device, so they are only safe until you need to use them. Still, in terms of protecting yourself from theft, there are few methods more effective than simply hiding your altcoins from the internet, at least at the moment. Want to learn more about protecting your altcoin? Subscribe to the Bitcoin Market Journal newsletter today!

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