Hot Vs Cold Cryptocurrency Wallet

To become a successful bitcoin holder, there are several obstacles you need to overcome first. The most difficult challenge is finding a safe place to store your cryptocurrency. What's the safest option and what's the difference between a hot and cold wallet?

There are many options when it comes to storing your bitcoin. Deciding on the safest storage method can be a daunting task because you're investing your hard-earned money. When making your decision, you should consider a hot vs cold wallet options. It helps to look at the pros and cons of each, the features, and most importantly, the safety of your cryptocurrency stored therein.

What is a cryptocurrency wallet?

A cryptocurrency wallet doesn’t work the same way as the wallet you use to store your money. It’s a safe place to store the key you use to access your tokens stored in your wallet.

How does a cryptocurrency wallet work?

A cryptocurrency wallet is used to store the public and private keys that are used to access the tokens stored in your wallet. This means the safety of your tokens is guaranteed but on the other hand, you won’t be able to access your tokens when you lose access to your key. The level of safety varies from the wallet you choose but generally, they are relatively safe. There is no option to reset your password which means you may end up losing your investment when you lose your key.

Types of Bitcoin wallets

The following are the types of wallets that are used to store cryptocurrencies:

• Desktop wallets

• Mobile wallets

• Hardware wallets

• Software wallets

What’s a hot wallet?

Simply put, a hot wallet is used to store cryptocurrencies over the internet. When using a hot wallet, both the private and public key is stored by the platform they are using. Considering how rampant cybersecurity has become, it's not recommended to store large amounts of cryptocurrency in a hot wallet.

Before making your final decision regarding the platform you're going to use, conduct thorough research to identify their reputation and genuine reviews from customers. Platforms are claiming to provide a safe place to store bitcoin only for clients to be robbed of their hard-earned cash.

What’s a cold wallet?

On the other hand, a cold wallet is used to store bitcoin off the grid. They come in the form of software you install on your computer or smartphone, or a device you plug into your computer. Cold wallets are the preferred method to store cryptocurrencies because they are offline and not vulnerable to hacking.

Hot vs Cold wallets

Both of these have their advantages and disadvantages as well as situations when it’s suitable to use one instead of the other. For example, you can use a hot wallet to store small amounts of cryptocurrencies. On the other hand, a cold wallet is suitable for storing large amounts of cryptocurrencies.

Advantages of a hot wallet

• You have access to your cryptocurrencies on the go

• Facilitates first trading

Disadvantages of a hot wallet

• Highly vulnerable to hacking

Advantages of a cold wallet

• Highly secure from hackers

Disadvantages of a cold wallet

• It’s slow when trading cryptocurrencies

• It takes time to store the cryptocurrencies

What’s the verdict?

Choosing whether to use a hot or cold wallet shouldn’t be a blanket approach. You should identify your needs and based on the pros and cons of each type of wallet, make your choice. If you’re looking for a more secure wallet, then a cold wallet is recommended. On the other hand, if you’re looking to store small amounts of cryptocurrencies and fast access to your tokens, then, a hot wallet would work better for you.