What is Cold Storage in the Context of Cryptocurrency?
Store your cryptocurrency where hackers can’t get their hands on – the cold storage.
What is Cold storage?
Cold storage, in the context of cryptocurrencies, stands for the offline reserve where one can store his/her coins.
How does Cold storage work?
A cryptocurrency exchange normally offers a feature that allows for instant withdrawals and might do so for thousands of Bitcoins on a daily basis. However, doing so comes at a risk of third parties accessing your funds.
To minimize the chances that the exchange or one of its users loses his/her funds during these transfers, webmasters follow a safety precaution which entails them keeping the majority of their coin reserve in cold storage. This, in other words, means that the coins are not present on the web server of any other electronic device. The only amount that is being stored on the platform is that which is expected to cover upcoming withdrawals.
Aside from that, individuals that store their coins offline are also making use of cold storage methods using what is more commonly known as a cold wallet.