Offline Storage Meaning
What is Offline Storage in Crypto?
Offline storage, also known as “cold storage”, is a way to hold and manage digital assets securely, completely offline and away from the internet. This implies that offline devices or wallets don’t have an active connection to the internet.
In an online environment, such as centralized exchanges and online wallets, funds are at greater risk of misuse, theft, or loss when held in an online environment. Offline storage safeguards private keys offline, securing it from malware attacks, hackers, and other internet vector attacks. It also gives the user complete control and ownership of their private keys, promoting self-custody.
Offline Vs. Online Storage
The main difference between offline and online storage is whether or not the system is connected to the internet. For instance, hot storage (online storage) involves storing and managing private keys in devices that maintain a constant connection to the internet, such as desktop wallets, software wallets, browser-based wallets, and mobile wallets. By securing the private keys in an offline environment, they become resilient to internet-based attack vectors.
While storing private keys online is the most convenient and user-friendly method of safeguarding digital assets, it is less secure than offline methods. An active internet connection gives bad actors a window to bypass the online wallet’s security measures to access a user’s keys.
Hardware wallets are a form of offline storage devices. Hardware wallets such as Ledger devices secure your private keys by keeping them secure and disconnected from the internet. Even when you perform transactions, private keys technically never leave the secure element chip, which is a secure component used to store sensitive data. Other types of offline wallets include steel wallets, deep cold storage wallets, and paper wallets.