Updated
GL-C-05
01 / In 30 seconds
The short answer
- What it is
- Storing private keys offline, without a permanent network connection
- Why
- To protect assets from hacking and remote access
- Forms
- Hardware devices, offline media, paper backups
- The main risk
- Loss of or damage to the device and the recovery phrase — access cannot be restored
- What to think through
- Backups, where they are kept and heirs’ access
02 / In plain words
What Cold storage means
Cold storage is a way of keeping the private keys to crypto assets offline, without a permanent internet connection. Hardware devices, isolated media and sometimes paper backups of the recovery phrase are used. The logic is simple: what is not connected to the network cannot be hacked remotely.
The opposite is hot storage, where the keys sit in an app or on a platform with permanent network access. This is convenient for active transactions but more vulnerable. A common practice is to keep a small operational portion in hot storage and the bulk in cold storage.
With cold storage the main risk shifts from an external threat to one’s own mistake. Losing the device, damaging the medium or losing the recovery phrase means irretrievable loss of the assets — no one can restore access. That is why backups, where they are kept and, separately, the procedure for heirs’ access are thought through: without this, the capital may disappear together with its owner.
A case from practice
While discussing succession planning, it emerged that access to part of a client’s assets existed in a single copy and the heirs knew nothing about it. The matter was dealt with separately — and it proved no less important than the tax side.
When it is used
- Long-term storage of crypto assets
- Storing the bulk of capital
- Protection from remote hacking
- Storage when travelling frequently
- Succession planning
- Separating operational and reserve funds
03 / What it covers
What needs to be thought through
Medium
- Hardware device
- Offline storage
- Reliability and wear
Backups
- Recovery phrase
- Several copies
- Different storage locations
Risks
- Loss of the medium
- Physical damage
- A forgotten phrase
Inheritance
- Heirs’ access
- Instructions
- Legal arrangements
04 / How it works
How to organise storage
Choose a storage method
Create backups
Spread the storage locations
Think through heirs’ access
Check access periodically
05 / Key facts
What you need to know
01
Offline storage protects against remote hacking
02
Loss of the keys and phrase is irreversible
03
Backups are kept in different places
04
Media wear out and need to be checked
05
Heirs’ access needs to be arranged in advance
Common mistakes
- Keeping a single copy of the recovery phrase
- Keeping the backup next to the device
- Photographing the phrase and storing it in the cloud
- Not checking that the medium works for years
- Leaving heirs no instructions
06 / Expert advice
How to prepare in advance
The recovery phrase is written down and kept in at least two different physical locations, not next to the device and not in the cloud. Access is checked periodically. And inheritance is always thought through: the instructions must allow heirs to gain access but must not be available to outsiders during your lifetime.
What we do for you. When we discuss succession planning, we raise crypto assets separately. It is the only kind of property that can simply disappear if the heirs cannot gain access.
Robert HaasHead of Company Formation
07 / Questions
Frequently asked questions
Storing private keys offline, without a permanent network connection, to protect assets from remote hacking.
In hot storage the keys sit in a network-connected app or on a platform — more convenient for transactions, but more vulnerable.
With a backup recovery phrase, access is restored. Without it, the assets are lost irretrievably.
In at least two different physical locations, not next to the device. Keeping a photo in the cloud or a messenger is a bad idea.
Prepare instructions in advance and arrange the access procedure so that heirs can use it and outsiders cannot.
Yes, periodically: media wear out, and a forgotten procedure is discovered only when you try to gain access.
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