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Crypto in plain English

One minute per topic – easy to understand and perfect for beginners.

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April 25, 2022

What is cold storage?

Welcome to the cryptohunt jam where we spend one minute a day to explain crypto. In plain english.

Last time, we discussed how moving crypto keys into a hardware wallet can provide additional protection against hackers. A term commonly used for that practice is cold storage… but what does that actually mean? 

Cold storage originally referred to the practice of freezing something, with the goal of preserving it for a very long time. 

In crypto, the goal is the same. By storing the password to a wallet offline, the risk of its exposure through a hack is greatly reduced. 

Do people print out passwords and put them in the freezer then? Probably not, but they do get pretty clever!

Hardware wallets are just one way to do it. But the hardware can malfunction. Printing is another way, but paper isn't protecting well against the elements. That's where products like the Cryptotag come in: it is a bulletproof titanium plate that you inscribe with a special tool for forever storage.

Interestingly, large exchanges such as Coinbase say that 98% of all customer funds are actually stored offline in cold storage. They only keep on hand what they actually need to operate with, while the rest is tucked away safely. How? They won't say for security reasons, but maybe there is a secret underground vault somewhere under the Arctic with a ton of titanium plates in it.

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