Recently, I saw many discussions about the news of Ko Wen-je’s cold wallet being seized and cracked, and I suddenly realized that many people still have a pretty vague understanding of blockchain wallets. Rather than calling it a wallet, a cold wallet is actually more like a key that determines whether you can truly control your assets.

Let’s start with the basics. Cryptocurrency wallets are not like bank accounts that hold your assets for you; they are just digital carriers used to store, send, and receive virtual assets. The core of a wallet consists of three things: private keys, public keys, and addresses. Among them, the private key is the most critical; it is a 256-bit random number, and only with it can you prove that the wallet belongs to you. Once leaked, the assets are gone.

Currently, there are mainly two types of wallets on the market. Hot wallets are connected online, such as exchanges, browser plugins, and mobile apps, which facilitate quick transactions but come with the risk that hackers can attack at any time. Many people store their assets in centralized exchange hot wallets, but after the FTX collapse, all those promised interests were meaningless, and assets were directly locked and unwithdrawable.

In contrast, cold wallets are much safer. They store private keys offline in hardware form, only connecting to a computer when needed for transactions, greatly reducing the risk of hacking. Common cold wallet brands include Ledger, Trezor, and Coolwallet, with prices around $100 to $250, supporting over 1,000 tokens, and even allowing staking and participation in DeFi.

My personal view is that if you hold a significant amount of cryptocurrency assets, investing in a cold wallet is really worthwhile. Especially after the FTX bankruptcy in 2022, many users started transferring Bitcoin out of exchanges for self-custody. According to data, at that time, 450k Bitcoins were moved to cold wallets, and some large exchanges withdrew hundreds of thousands of Bitcoins within just a few days. This fully demonstrates a truth: in times of high market risk, it’s most reliable to manage your assets yourself.

Of course, cold wallets also have their thresholds. You must purchase them through official legitimate channels, and when they arrive, check whether the packaging is intact to avoid tampering. If you really lose your cold wallet hardware, as long as you remember your private key and seed phrase, your assets can still be recovered because, in essence, the assets exist on the blockchain; the cold wallet is just a reading tool.

My advice is that assets used for trading can be stored in hot wallets for convenience, but the portion you hold long-term should definitely be stored in a cold wallet. This way, you can enjoy the convenience of trading while maximizing the protection of your assets, which is a fairly balanced approach.