Hot vs. Cold Crypto Wallets: The main ways to store and trade cryptocurrencies and tokens are through “hot” and “cold” wallets. To figure out which works best for you, you need to know the difference between a hot wallet and a cold wallet.
A “hot” cryptocurrency wallet is connected to the internet, while a “cold” cryptocurrency wallet is not connected to the internet at all and is generally only accessible through hardware devices.
The differences between the two types of wallets can help you figure out which one is best for you. Finding the best wallet is a matter of opinion, and you should choose one that fits your needs and gives you the most options.
Hot Wallets Explained
The internet is linked to hot crypto wallets. They have a number of benefits, such as the ability to store, send, and receive tokens and to manage and see all tokens in one place. Hot wallets can be used on phones, tablets, and computers that can connect to the internet. Many people use hot wallets because they make it easy to send and receive money at any time.
It’s easy to understand how a crypto wallet works: After you buy or mine cryptocurrencies, it saves the private keys to them. When a deal needs to be made with cryptocurrency, private keys are needed.
Types of Hot Wallets
There are different kinds of hot wallets that are used for different things. Some are used as mobile apps, wallets that only work on the web, or wallets that only work in certain ecosystems. The list is long, and how a wallet is used depends on the needs of the user.
Some of the most popular hot wallets are Coinbase Wallet, MetaMask, Trust Wallet, Exodus Wallet, Robinhood, Edge, and others.
For instance, MetaMask is a wallet that only works with Ethereum-based coins. Trust Wallet doesn’t hold your money and can store up to 65 different coins and tokens. It can be used on the web and on mobile apps. Exodus Wallet is a program wallet that can be used to store more than 260 different types of cryptocurrency.
Hot Wallet Pros and Cons
| Advantages | Disadvantages |
|---|---|
| Internet-based, so it’s easy to get to them and they can do many things well and on a variety of devices. | Because they are connected to the internet, hackers can get into hot wallets that are not secured. These are a target for unauthorized people because they have both public and private keys. |
| Most are free to use, but some ask you to pay interest on the crypto you store. | Some are only accepted and available in certain places because of the law. |
Cold Wallets Explained
Cold wallets are different from hot wallets because they aren’t connected to the internet.1 So, they are less likely to be hacked. Because of this, cold wallets have become very popular after the collapse of FTX, a big centralized cryptocurrency exchange that shut down in November 2022, went bankrupt, and said it was hacked, causing many users’ digital assets to be frozen or lost.
Most of these wallets look like USB sticks and cost between $50 and $200. Cold-storage wallets are things like hardware wallets and wallets made of paper.
Types of Cold Wallets
There are also different kinds of cold wallets. Some of the most popular ones are:
This is a piece of paper that has both the public and private keys written on it. A quick response (QR) code is also printed on the paper to make crypto transfers easier. The problem is that it doesn’t work if the paper gets damaged.
This type of cold wallet is used by many people. They are not connected to the internet and are used to store secret and public keys. They come in the form of USB drives or smart cards, and you couldn’t get to your crypto without them. Hardware wallets like Trezor, Ledger, and KeepKey are often available.
Deep cold storage is a type of wallet that makes it very hard to get to your money by adding extra steps. In a similar way, you could keep your cold wallet in a bank locker or safe deposit box. These wallets are made for people who need to get to their money as little as possible.
Cold Wallet Pros and Cons
| Advantages | Disadvantages |
|---|---|
| Because of better protection, there is no way to be hacked. | Easy to lose |
| You have full power over your tokens because you have private and public keys. | Pricey, with most items costing between $50 and $200 |
| Portable | Hard to use |
Is It Better to Have a Hot Wallet Than a Cold Wallet?
This question has no right answer. Which wallet is best for you depends on what you need and what you like. The hot wallet is good for someone who often buys and sells cryptocurrency. When a crypto holder makes a few trades, a cold wallet is better.
Which One is Better, a Hot Wallet or a Cold Wallet?
Because your private and public keys are linked to the internet, they are less safe in a hot wallet than in a cold wallet. With a cold wallet, on the other hand, you have full control over both your secret and public keys.
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