Custody

Coinbase CEO Brian Armstrong addresses major misconceptions surrounding cold storage

February 22, 2019, 11:00AM EDT

There are certain misconceptions concerning cryptocurrency custody, and Brian Armstrong, CEO and co-founder of Coinbase, decided to address them in his article published in Fortune.

He discusses major misconceptions surrounding cold and hot storage, addressing it is possible to make trades as well as earn interest on cold-stored funds. He also debunks the myth there is always just one key holder when funds are stored online. He also explains that although hardware security modules are a great security tool, they do not yet offer the same amount of protection cold storage does.

Armstrong claims cold storage does not necessarily mean the funds are impossible to trade—in fact, certain products, such as Coinbase Custody, allow you to “trade over-the-counter using delayed settlement.” The funds will be transferred only after the trade is made.

Similarly, there are ways to make an investment while your funds are placed safely in the cold storage. Tezos, for instance, allows keeping a small portion of funds online to potentially make a profit. There are also other projects in the works.

Meanwhile, Armstrong notes, “the number of key holders and hot versus cold storage are unrelated concepts.” Therefore, their number is reliant only on the design of a custody solution.

Both hot and cold storage offer different advantages—funds stored online can be traded off faster while offline storage offers better protection.

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