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In general, cold storage in IT means keeping data or other items at rest, or in a less accessible part of a system. In the world of bitcoin, cold storage refers to the practice of keeping bitcoins off-line in order to prevent unauthorized access.
With bitcoin, owners can use various kinds of bitcoin wallets and put bitcoins in a place where they can not be accessed by servers connected to the Internet.
As with cash, bitcoins can be kept where they can be used quickly, or where they can be stored securely. Storing bitcoins involves dealing with the encryption of these digital currency units. However, the essential concepts of bitcoin cold storage are relatively straightforward. For example, a bitcoin owner can keep a few coins in an Internet-connected digital wallet, while downloading the rest of the bitcoin capital into a USB flash drive. That USB flash drive can be put in a bank vault, the same way that gold bullion or other physical resources are stored for optimal security.
These kinds of storage functions are just part of the emerging popularity of bitcoin as a rival to national physical currencies, that is now being accepted by more sellers of products and services. In that sense, various cold storage strategies for bitcoin represent a new move from physical cash to digital assets. Unlike the last major transformation of finance, bitcoin presents a unit-based system that is in many ways similar to cash, where the move from checking to commercial transactions through credit or debit cards were more of a convenient account access-based system. That said, the popularity of bitcoin could have big consequences in how people manage their money and their wealth.