Whenever one thinks about keeping cryptocurrency safe, he will often come across the term “cold storage.” If you’re a newcomer in this whole world of crypto, you’ll go, “What crypto exchanges store cold storage?”

Well, that’s a very good question and a very important one for any person looking to store his digital assets safely. In this post, we shall look into what exactly cold storage means, why it’s important, and which crypto exchanges use cold storage to protect your funds.

What is cold storage?

Before we get into details of which exchanges use cold storage, let’s break down what cold storage actually is. This is a way of storing cryptocurrency offline and away from the internet. The method is used to help protect digital assets from hacks, theft, and other forms of online threats. Since it keeps the assets off the grid, they are much less exposed to cyber-attacks.

There are a number of ways storage in cold form can take place:

Hardware wallets: Very much a real tangible item, just like old USB sticks, keeping your private keys off-line.

Paper wallets: A paper wallet is just that, a piece of paper with your private keys inked on it. It is one of the safest means to have your cryptos stored as long as you don’t lose it.

In the context of exchanges, cold storage generally means that the bulk of customers’ funds are stored in so-called offline wallets, with only a little held online, in so-called “hot wallets,” to make day-to-day trading possible.

Why is cold storage important?

But the number one reason cold storage is important is for security. With cryptocurrency exchanges being a popular target for hackers, there have been cases—rather highly publicized ones—where exchanges are compromised and millions of dollars in user funds are lost.

By keeping the majority of the assets in cold storage, exchanges minimize the chances of losing customers’ money during a possible hack. So, even if a hacker gets access to their online systems, to begin with, they will merely get a small percentage — most have already been stored offline.

Which crypto exchanges utilize cold storage?

So, if you have been wondering, “What crypto exchanges store cold storage?”, here are some of the most famous exchanges that take security seriously by keeping their assets strictly offline:

1. Coinbase

Coinbase is one of the most popular and trusted crypto exchanges in the world; besides, it’s widely known for its strong security practices. Nearly 98% of Coinbase customers’ funds are held in cold storage. In simple words, almost all assets are kept offline in secure locations all around the world, which makes it nearly impossible for hackers to access them. Of course, this percentage is kept in hot wallets to facilitate quick transactions in everyday trading.

2. Binance

Another giant in the crypto world, Binance enlisted cold storage for the safety of a good portion of its users’ funds. While Binance itself doesn’t openly say what percentage, it is widely agreed that the majority are kept off the internet. A few other salient facts: It’s widely known that the majority are kept offline, and also has an emergency insurance fund, called Secure Asset Fund for Users, or SAFU for short, covering any potential losses from hacking.

3. Kraken

Kraken is an American exchange that is quite serious about security. It keeps 95% of the customers’ assets in cold storage. Funds are spread over numerous locations around the globe, each protected with rigorous physical security measures, such that even if some facility is breached, you are still safe. This has made Kraken a go-to among more serious traders and institutions.

4. Gemini

Another exchange that takes security seriously is Gemini, founded by the Winklevoss twins. Gemini has the majority of its assets stored in cold storage. It has also used the multi-signature system to make sure the funds are secure. Multi-signature means more than one key is needed to get access to the wallets, and these keys are kept physically in different locations.

5. Bitfinex

Another major exchange is Bitfinex, which is proclaimed to be one of the largest exchanges in terms of trading volume. Bitfinex opts to keep the vast majority of its funds in cold storage. This is in the form of a multi-signature cold storage system, in which it requires multiple approvals from different locations to access funds. This adds an extra layer of security to ensure that even when part of the system is compromised, then funds remain safe.

6. Bitstamp

Bitstamp is one of the oldest cryptocurrency exchanges and has a long-established reputation for security. The majority of the customers’ assets are kept in cold storage, guarding against potential threats of going online. The exchange has put in quite a number of tight security measures and has never suffered large-scale security breaches.

7. KuCoin

KuCoin suffered a huge hack in 2020; the exchange, however, has increased its security system to a great extent by implementing much more cold storage. KuCoin now stores most of its funds in an offline mode, making sure they are completely safe from all online threats. It has developed a multi-layer security system to safeguard the users’ assets further.

8. Huobi

Huobi is one of the top exchanges in Asia, and it’s very famous for the rigors in its security measures. Most Huobi assets are stored in cold storage; hence, they’re hack-proof. They even make use of a distributed cold storage system that creates another layer of safety by storing the funds in numerous places offline.

9. OKX (formerly OKEx)

Another big exchange that ensures users’ money is safe through cold storage is OKX. At the exchange, a multi-signatured cold wallet system is in place, where access to the funds will require approvals from several parties. The system protects against online and physical threats, hence being highly secure.

10. Bittrex

Bittrex is US-based, having a very high emphasis on security. A large part of the users’ funds is stored in cold storage, which in turn is multi-layer secured. In terms of their cold wallets, Bittrex has each of them geographically distributed, which makes it quite hard for hackers to access the funds.

How to choose an exchange based on cold storage

While choosing a crypto exchange, security should be the prime factor. Here are a few tips on how to check the security practices of an exchange in regards to cold storage:

1. Check the percentage of funds kept in cold storage: The higher the percentage of the funds kept in cold storage, the more secure the exchange will be. Look for exchanges that store at least 90% of their assets offline.

2. Look for Multi-Signature Systems – Exchanges that use multi-signature cold wallets improve the grade of security of their system. As a result, even when one part gets attacked, funds are safe.

3. History of security events on the exchange: Check whether an exchange has ever experienced some security breach in the past. In case yes, then see what they did, and whether they improved security.

4. See what other users say: Individual users can often report on the security practices that an exchange follows. Look for reviews that mention if they use cold storage and give any kind of comment on the level of security.

5. The reputation of the exchange: The older the exchange and the more years it has operated without being hacked, the better. Exchanges like Coinbase, Binance, and Kraken have literally built their names on protecting user funds over the years.

Here are some exchanges we recommend

To sum it up

Therefore, if you’ve been asking the above-mentioned question, you now have one thing in mind: which secure crypto exchanges have cold storage? Most of the exchanges in the top priorities for security have most of the assets stored offline in cold storage. This decreases the chances of hacks astronomically, thus keeping your funds safe.

Security practices are very important, and in choosing, cold storage practices should be closely identified. By choosing this means, you can then trade with confidence that your assets are safe – with an exchange that practices cold storage for your assets.

Remember, as good a security measure as cold storage is, it does not necessarily mean best practices are to be applied on your end. Use strong passwords, enable two-factor authentication, and consider using a hardware wallet for added security. With the right precautions, you can secure your cryptocurrency safely.

Security and cold storage exchanges: recommended

For those looking for something with real security—adding, besides, a general use of cold storage—ahead are our top two exchanges in this category:

1. OKX – Rating 9.5/10

OKX is at the very top because of that excellent infrastructure it has in place for security—going as far as using a multisig cold wallet system. This setup convenes a confirmation that your funds are kept offline and also that your access to them is guarded by layers of approval. OKX is one of the most respected exchanges with a huge emphasis on security for its users, so it is at the top of our list. The platform is also very easy to use and therefore ideal for new traders and professionals alike.

2. KuCoin – Rating: 9/10

Next up, we have KuCoin, which gets our second-highest rating, especially after the increase in its security following the 2020 hack. The platform has moved a majority of its holdings into cold wallets and also introduced a multitier security system so as to shield customer assets. KuCoin is also popular for the wide range of cryptocurrencies it supports and the user-friendly interface it boasts, making it such a great option for anyone looking to use a secure trading platform with diverse offerings.

By choosing either of the two exchanges, you will be opening an account on a secure platform, and you can also take advantage of their maximal cold storage practices. Be it features, number of assets, or top-level security, OKex and KuCoin are the best choices to look up to when securing your cryptocurrency investment.

This article was aided in writing by AI and edited and reviewed by our editor.