Lately, I’ve been thinking about a question: how can people who hold cryptocurrency truly sleep soundly? I’ve found that many people actually underestimate the importance of cold wallets.

To be clear, the concept of a cold wallet isn’t complicated. Simply put, it means storing your assets in a completely offline place—without a network connection, hackers can’t reach it at all. Compared with hot wallets, which need to stay connected to the internet at all times in order to trade, cold wallets use the complete opposite logic—sacrificing convenience for security.

I recently came across a case. Samira Tollo, the CTO of the Australian exchange Elbaite, mentioned that after incidents like FTX, more and more investors have started to place greater importance on self-custody. Her advice is very practical: if the amount of crypto assets you hold is large enough, or you don’t need to access them frequently, then you should consider a cold wallet. On the other hand, if you’re a short-term trader, speed may matter more than security, and a hot wallet would be more convenient.

There are actually several forms of cold wallets. The most common is a hardware wallet—those devices shaped like a USB drive or a card—with prices usually ranging from $79 to $255. There are also paper wallets, which print the private key on paper; they’re cheap, but the risks are that they’re easy to be damaged or lost. Another more distinctive type is a sound wallet, which converts the private key into audio stored on a CD or vinyl. However, this technology is relatively new, and it’s also more difficult to use.

Why can cold wallets provide better protection? The key is that the private key is never exposed to the internet. When you need to make a transaction, the entire signing process happens in an offline environment. Even if hackers find the transaction record, they still can’t steal the private key. That’s why many people are willing to accept the inconvenience that cold wallets bring in exchange for security.

That said, I also have to be honest: cold wallets aren’t perfect. They cost more than hot wallets, and each time you use one you have to enter a password or PIN, making the transaction process relatively more cumbersome. And if you lose the device or forget to back up the seed key, restoring your assets can become extremely complicated. So when using a cold wallet, basic skills like protecting the device itself, setting a strong password, and regularly updating the software are absolutely necessary.

I think the most practical approach is to find a balance based on your own situation. If you’re a long-term holder with a sizable amount of assets, then investing in a cold wallet is worth it. But if you often need to trade or withdraw funds, you may still have to rely on the convenience of a hot wallet. Many people actually use both: most assets are kept safely in a cold wallet for peace of mind, while a small amount of liquid funds is kept in a hot wallet for convenient use.

In the end, the biggest value of a cold wallet is that it gives you a truly personal way to store assets that doesn’t depend on any platform. In today’s era, where problems at exchanges happen frequently, this ability for self-custody has indeed become increasingly important.