Cold Wallet Full Guide: From Basic Knowledge to Practical Purchase, Detailed Explanation of the Differences Between Cold Wallets and Hot Wallets

Why are so many people suddenly talking about cold wallets?

In the past two years, blockchain applications have experienced explosive growth, and on-chain transaction demands have become increasingly strong. More and more people are starting to use hot wallets for daily transactions, but accompanying issues have also emerged—how to securely manage private keys and seed phrases? If one is careless and these keys are lost or stolen, assets could vanish in an instant. For this reason, cold wallets have transformed from niche tools into an urgent necessity.

But the problem is, the market is flooded with various cold wallets, with significant differences in products, and prices ranging from dozens to hundreds of dollars. How to choose? How to use? These questions trouble many people.

What is the essence of a cold wallet: what exactly is it?

When talking about cold wallets, first you need to understand what a wallet is for.

Cryptocurrency Wallet (Crypto Wallet) is essentially a digital management tool used to store, transfer, and receive virtual assets. Based on storage location and online status, wallets are divided into two main categories: cold wallets and hot wallets.

Cold Wallet refers to a cryptocurrency wallet where private keys are stored on offline devices. This typically includes hardware wallets, paper wallets, USB wallets, and other forms.

Hot Wallet also called software wallets, are online-stored cryptocurrency wallets, including app wallets, PC wallets, etc., which can be used for transactions at any time when connected to the internet.

The fundamental difference between the two is one is offline, the other online.

How does a cold wallet work? Two key steps

Step 1: Key pair generation

When you set up a cold wallet for the first time, the device automatically generates two “keys”—a public key and a private key—using encryption algorithms.

Public Key is akin to your account address or receiving code, which can be publicly shared, mainly used to receive cryptocurrencies.

Private Key is the true symbol of authority; possessing it means you have absolute control over all assets in the wallet.

There is also a concept called Seed Phrase (Mnemonic Phrase), which is another form of the private key, usually consisting of 12 or 24 English words, designed to be easy for humans to remember.

Step 2: Physical isolated storage

The core advantage of a cold wallet is—disconnection from the internet. Private keys are physically isolated on offline devices, making remote attacks by hackers and malware virtually impossible. This is the fundamental reason why cold wallets are far more secure than hot wallets.

It’s worth noting that cold wallets can store private keys generated from other devices or hot wallets, but typically, a cold wallet can only store one private key.

How to choose a hardware wallet in 2025? Benchmark of three mainstream products

Currently, the market’s notable hardware wallets include:

Ledger Nano X

This is the flagship product from France’s Ledger. Security certification reaches CC EAL 5 level. Compact size (72mm×18.6mm×11.75mm), weighing only 32 grams. Supports over 5500 cryptocurrencies, covering the full spectrum from Bitcoin, Ethereum to mainstream new coins. Official price is $149.

Trezor Safe 5

Produced by Czech company SatoshiLabs, with higher security certification reaching CC EAL 6+. Its main feature is a touchscreen, providing a more intuitive interaction experience. Supports over 1000 cryptocurrencies. Priced at $169.

SafePal S1 Pro

This is a cost-effective option, with security certification CC EAL5+. Supports connection via USB-C and QR code scanning. Supports the most coins, over 30,000, covering almost all existing cryptocurrencies. The most affordable, at about $89.99.

Difference between cold and hot wallets: which one should you choose?

Both types of wallets have their advantages; it depends on your usage scenario:

Simple judgment: If you are a long-term holder and optimistic about a certain coin’s future prospects, planning to hold for over a year, a cold wallet is the best choice. If you trade frequently or do short-term operations, hot wallets offer more convenience.

Cold wallet purchasing guide: four decision-making dimensions

Choosing a cold wallet should not be blind; evaluate from these four aspects:

1. Security first

The core selling point of a cold wallet is security. Check whether the product uses strong encryption algorithms, multi-factor authentication, secure chips, and other security measures. Different manufacturers have significant technical differences; be sure to select products with security certifications (such as CC EAL levels).

2. Coin compatibility

Confirm whether the wallet supports the cryptocurrencies you hold. Although mainstream hardware wallets claim support for thousands of coins, some obscure tokens may not be compatible. Always verify the support list on the official website before purchasing.

3. Price and budget

Cold wallets range from dozens to hundreds of dollars. Don’t just look at the price; consider the cost-performance ratio. Spending $100 on a feature-rich, highly certified product is much more worthwhile than buying a cut-down version for $50.

4. User experience and interface

While core functions are similar, operation procedures, screen design, and connection methods vary significantly across products. It’s recommended to check official websites, YouTube reviews, and user feedback to choose a product with intuitive operation and clear feedback.

Practical guide to using a cold wallet

Step 1: Generate or import key pair

If you are a new user, you can generate a new public-private key pair using a cold wallet or hot wallet. If you already have private keys stored in a cold wallet, you can skip this step.

Step 2: Unlock and initiate transactions

When making a transaction, connect the cold wallet to your phone or computer. Enter your PIN or password to unlock the device, then you can initiate a transfer.

Step 3: Local verification and confirmation

A critical step—transactions must be verified directly on the cold wallet device. Do not verify on your computer or phone; confirm transaction details on the wallet device’s screen. This ensures the private key remains offline.

Step 4: Properly store hardware and backups

Although hardware wallets are usually resistant to drops, water, and fire, you should still handle them carefully to avoid severe impacts. It’s also strongly recommended to back up your private keys and seed phrases on paper or USB drives, stored securely (e.g., in a safe). In case the hardware is damaged, backups allow you to restore assets on a new device.

Important tip: When connecting a cold wallet, only connect to official websites and reputable DApps. Avoid connecting to unknown sites or suspicious DApps, as this could compromise the security advantages of your cold wallet.

The cold wallet market is expanding—what does the future hold?

According to public data, the number of global crypto wallet users was about 68 million in 2021, and surpassed 80 million by mid-2022, with astonishing growth. Research institutions also predict that the hardware wallet market size, from $400 million in 2021, will grow to $3.6 billion by 2032.

Market expansion means increased competition. More companies are entering the hardware wallet space, and to compete for market share, they are forced to improve their products—stronger security, support for more coins, lower prices, better cross-chain experience. This is good news for users; wallet products will become increasingly excellent.

In summary, cold wallets and hot wallets are not mutually exclusive but complementary. In a comprehensive crypto asset management plan, hot wallets facilitate trading convenience, while cold wallets ensure asset security. Using both—storing large assets in cold wallets as a vault, and using hot wallets for daily quick operations—is the standard approach for mature investors.