How Does ‘Cold Storage’ Custody Differ from ‘Hot Wallet’ Custody for Institutional Crypto Assets?
Cold storage involves keeping the private keys offline, completely disconnected from the internet, offering the highest security against cyber theft. This method is used for the vast majority of an institution's assets.
Hot wallet custody involves keeping keys online, connected to the internet, for quick access and transactional purposes. Hot wallets are used for a small portion of assets needed for immediate trading or operational needs but carry a higher risk of hacking.
Glossar
Cold Storage
Security ⎊ Cold storage, within cryptocurrency and derivatives, represents an offline method for safeguarding private keys, mitigating exposure to online threats like exchange hacks or malware.
Hot Wallet Custody
Custody ⎊ The term "Hot Wallet Custody," within the context of cryptocurrency, options trading, and financial derivatives, denotes the practice of retaining control over private keys associated with digital assets while leveraging a connected, internet-accessible wallet.
Hot Wallets
Exposure ⎊ Hot wallets, within cryptocurrency ecosystems, represent a readily accessible, software-based means of storing private keys, facilitating immediate transaction capabilities; this contrasts with cold storage methods prioritizing long-term security over transactional expediency.
Custody
Security ⎊ Custody refers to the specialized service of safeguarding the private cryptographic keys that grant control over digital assets, a paramount concern in the crypto derivatives space.