A cold wallet, unlike a hot wallet, is a wallet that is disconnected from the Internet. Therefore it is much safer than a hot wallet, which could fall victim to a hack. With cold wallets, there are generally two types: hardware wallets and paper wallets.
Hardware Wallet
A hardware wallet is a device on which the private keys of crypto assets can be stored. Theoretically, this could be a simple USB stick, but this does not provide any additional functionality. Well-known hardware wallets like Trezor, Ledger and Bitbox offer different web interfaces to online services.
It should be noted that these devices do not support all crypto assets. More importantly, the seeds, or words for recovery in case of loss of the hardware wallet, must be stored securely. Hardware wallets offer the highest security standard for private users when used correctly.
Paper Wallet
A paper wallet is an offline mechanism for storing crypto-currencies. With a paper wallet, the public address and private key are printed offline or written down on a piece of paper. Also known as physical wallets, they are considered one of the most secure ways to store crypto assets, provided they are properly constructed and certain precautions are taken.
Paper wallets can be generated using an open source wallet generator. It is generally recommended that users disconnect their Internet access while the keys are being generated and that users delete their history after the keys are created. Ideally, the keys should be created on a brand new computer to completely avoid malware interference.
Finally, the paper wallet is stored in a secure location such as a bank vault. Here the physical piece of paper must be protected from physical damage. If the keys fade and can no longer be read, the user will no longer be able to access the crypto values stored at that address.
