It is inevitable, if you want to protect your cryptocurrency investments, you’ll see the terms hot and cold wallet at some point or another. What’s the best type of wallet for your investment? We created this guide to answer this question and more.
1. What’s a Hot Wallet?
Hot wallets are generally accessible via a web browser, and they obviously require an internet connection. As a result, they are vulnerable to hackers and fraudsters alike, as some of them can steal your password and username information while you’re trading or looking for the best trading robot on the web.
Of course, everybody loves hot wallets for their ease of use, their accessibility features, and their fast pace management. They are, however, not the most secure way of vaulting your coins, even if it’s true that the latest security updates made most of them safer than before. This is why it is always better to have multiple wallets so you don’t become an easy target for crypto pirates.
2. What’s a Cold Wallet?
As the name indicates, a cold wallet is designed for cold storing your cryptocurrencies in an offline environment. Often called hardware wallets or ledgers, they most commonly come in the form of a big USB key with a screen. Some newer models even offer a Bluetooth connection, allowing one to connect the device to an iOS or Android phone.
Any transactions, in and out, being made with the user account linked to the cold wallet, will require approval from the private key owner via the ledger/hardware wallet. Therefore, we can safely say that cold wallets are the most secure way of trading and storing cryptocurrency, as only you have access to your offline device.
3. What are the different types of crypto wallets?
Aside from the hot and cold categories, there are also different types of wallets. Let’s take a quick look at the different crypto wallet types below:
- Web-based Wallet Normally used through a browser like Metamask for example. This is the most used type of wallet, but it is also the less secure one of them all.
- Mobile Wallet There are many crypto wallet apps you can get on your smartphone such as Coinomi, Green, Exodus, EDge, Bitcoin Wallet, and so on.
- Desktop Wallet These are installed directly on your PC hard drive. The most common desktop wallets are Electrum, Coinbase, and Exodus.
- Hardware/Cold Wallet Also called a ledger device, the best ledger for storing your crypto offline is the Ledger Nano X. You can also buy something a bit cheaper like the Ledger Nano S, or the Trezor One.
- Paper Wallet If you want to go the old school way, a pen and a piece of paper can be plenty, as long as you don’t dirty the latter or lose it! On your piece of paper, you can manually write all your private keys and even print some QR codes.
And there you go, now you know all of the differences between hot and cold cryptocurrency wallets. As always, be careful with your private information and don’t leave all of your investments in one place.