Cold storage

Cold storage keeps private keys offline, for example in hardware security modules in air-gapped facilities, on dedicated hardware wallets, or on paper or metal backups stored in vaults. Transactions are prepared online, carried to the offline device for signing, and then broadcast, so the keys are never exposed to networked systems.

Because most large thefts of crypto involve compromised online keys, cold storage is the standard for holding the bulk of long-term assets. The trade-off is speed: withdrawals can take hours or longer, so exchanges and funds keep a smaller hot wallet balance for daily activity. Institutional cold storage adds physical security, geographic distribution of key material, multiple approvals and regular audits.

For allocators, the share of assets in cold storage and the controls around it are core custody due diligence questions. Example: a spot bitcoin ETF’s custodian holds the fund’s coins in segregated cold storage addresses and processes creations and redemptions through scheduled withdrawal windows.