What is a cold wallet? A must-read guide for beginners choosing a cold wallet

Why Are So Many People Suddenly Using Cold Wallets

In the past two years, as blockchain applications have increased, many people have started learning to use wallets. But accompanying this trend are questions like—What if I lose my private key? What if I forget my seed phrase? Many have watched helplessly as their crypto assets were stolen or permanently lost due to poor management.

Against this backdrop, cold wallets have become popular. Compared to hot wallets that are always online, cold wallets store assets offline, making them the preferred choice for many experienced users. But the question is—how to choose and use cold wallets among the many options on the market? This article will clarify everything for you.

What Exactly Is a Cold Wallet

Let’s start with the basic concept.

A cryptocurrency wallet is a tool used to store and manage virtual assets. It helps you receive, store, and transfer various cryptocurrencies like BTC, ETH, DOGE, LTC, etc. Wallets are divided into two types—hot wallets and cold wallets.

A cold wallet refers to a wallet stored on an offline device. The most common form is a hardware wallet, including paper wallets and USB wallets. Simply put, as long as your private key is stored in a non-connected device, it is a cold wallet.

A hot wallet is the opposite, also called a software wallet, stored on online devices like computers or smartphones, allowing for instant transactions but with relatively lower security.

How Cold Wallets Work

Cold wallets may seem mysterious, but their principle is actually twofold:

Step 1: Generate a public key and private key

When you first set up a cold wallet, it automatically generates a key pair through encryption algorithms:

• Public key (also called address): Like your bank card number, it can be shared publicly for others to send you funds.
• Private key: The real treasure—like your bank card password, it grants full control over the assets in the wallet.

There is also a related concept called seed phrase, which is a user-friendly version of the private key, usually consisting of 12 or 24 English words, designed for easier memorization.

Step 2: Store the private key offline

This is the key to the security of cold wallets—offline storage of the private key. Since the device is disconnected from the internet, hackers and malicious software cannot remotely attack an offline device. This is the core advantage of cold wallets.

Note that a cold wallet typically stores only one private key, with some limitations on quantity.

Three Hardware Wallets Worth Buying in 2025

If you decide to buy a cold wallet, these three are currently the most reputable and widely used options:

Ledger Nano X

• Made by French company Ledger
• Security level up to CC EAL 5
• Compact size (72mm × 18.6mm × 11.75mm), weighs 32g
• Supports 5500+ cryptocurrencies
• Official price: $149

This is the top-tier entry-level hardware wallet, with excellent stability and compatibility.

Trezor Safe 5

• Made by Czech company SatoshiLabs
• Security level CC EAL 6+ (higher than Ledger)
• Equipped with a touchscreen for better interaction
• Supports 1000+ cryptocurrencies
• Price: $169

Its selling point is the highest security certification, suitable for advanced users with high security demands.

SafePal S1 Pro

• Security level CC EAL 5+
• Supports USB-C connection and QR code scanning (very convenient)
• Supports over 30000 cryptocurrencies (most supported coins)
• Price: about $89.99 (most affordable)

Known for its cost-effectiveness, especially friendly to users with diversified assets.

How to Choose a Cold Wallet Without Falling Into Pitfalls

Everyone’s needs differ, but the logic for choosing a cold wallet is generally similar, mainly considering four dimensions:

1. Security First

Cold wallets are designed for security, so check what encryption technologies the manufacturer uses, whether multi-factor authentication is supported, and the security certification level. CC EAL 5+ is a more reliable standard.

2. Support for Your Held Coins

Before buying, clarify which cryptocurrencies you hold, and check the wallet’s compatibility list. Most hardware wallets support thousands of coins, but there are exceptions. It would be embarrassing if you buy one that doesn’t support your assets.

3. Budget Appropriately

Cold wallets range from a few tens to hundreds of dollars. Decide how much assets you need to store first, then determine if it’s worth spending that money. Generally, the more assets you have, the higher the cost-performance ratio of investing in a good cold wallet.

4. User Experience

Appearance, operation process, and interface friendliness all affect your user experience. Some wallets are complex, others are simple. It’s recommended to read user reviews and find a product that suits your habits.

All this information is available on official websites, and user reviews and review videos are also very helpful references.

How to Use a Cold Wallet

Assuming you already have a public-private key pair (or a newly generated cold wallet), here is the usage process:

Step 1: Sign transaction authorization

When you want to use the cold wallet for transactions, connect it to your phone or computer, enter your PIN or password to unlock. Then you can initiate a transaction.

Step 2: Verify the transaction

After initiating, you can confirm directly on the cold wallet device or via the accompanying software on your phone or computer. Confirm that everything is correct before submitting.

Step 3: Complete the transaction and disconnect from the internet

After the transaction, turn off the device. The private key and seed phrase return to offline status, ensuring security.

Important tip: Never connect to unknown DApps, as cold wallets can be attacked just like hot wallets.

Safeguard your hardware

Although modern cold wallets have drop-proof, waterproof, and fireproof features, you should still handle them carefully. Damage or loss means your assets are truly gone.

It’s recommended to back up your private key and seed phrase on paper or USB drives, and store multiple copies in different locations.

Cold Wallet vs Hot Wallet, What’s the Difference

Both are tools for storing crypto assets, but the differences are significant:

In simple terms: Use a cold wallet for security, hot wallet for convenience. Many experienced users use both—hot wallets for daily transactions, cold wallets for large assets.

The Cold Wallet Market Is Booming

Data shows that the number of crypto wallet users has reached around 68 million, and in the first half of 2022 alone, it exceeded the total for 2021’s 80 million.

The hardware wallet market is even more impressive—reached $400 million in 2021, and is projected to grow to $3.6 billion by 2032.

As demand increases, more developers are entering this market, leading to fierce competition. But this is a good thing—developers are compelled to improve security, support more coins, lower prices, and enhance user experience to capture market share.

Final words: The purpose of explaining what a cold wallet is and how to choose and use one is clear. If you have substantial crypto assets and plan to hold long-term, investing in a cold wallet is definitely worthwhile. Security first, everything else is secondary.