We cannot discuss cryptocurrency storage without talking about cryptocurrency wallets. This brings us to the two types of wallets; have cold wallets and hot wallets. This article shall explore the difference between these two wallets and which one suits you better.
Before we delve into cold storage wallets and hot storage wallets, do you know what a cryptocurrency wallet is?
What Is a Cryptocurrency Wallet?
It is a special method of “storing” Bitcoin or other digital currencies and keeping them safe and secure. Crypto wallet is unlike our “normal” wallet where you get money and put inside your wallet. You can only store and secure your digital currencies in crypto wallets. Now that we have understood the concept of a cryptocurrency wallet let us discuss cold and hot wallets.
What Is A Cold Wallet?
This is a type of crypto wallet that is entirely offline. It can come in software like an app that you can use on a smartphone or computer. Alternatively, it can also be a hardware device that can be plugged in but remains completely offline. In terms of the security of your cryptocurrency, cold wallets are arguably the best you can get.
What Is A Hot Wallet?
This is the type of cryptocurrency wallets that can be used online through platforms that provide storage services. When using a hot wallet, you entrust your private and public keys to the third party platform that manages and secures them both. You shouldn’t leave a large number of cryptos in a hot wallet because the platform might be vulnerable to hacking. Before signing up for a hot wallet, ensure you have done your due diligence about the wallet provider.
Hot Wallets VS Cold Wallets
Although both cold wallets and hot wallets have their advantages and disadvantages, your choice much depends on what you are after. For instance, if you want to store a small amount of crypto in an easy and seamless location, a hot wallet will be your best bet. However, if you want to store a huge amount of Bitcoin, Ethereum, or any other cryptocurrency, you will have to opt for a cold wallet.
The essence of these Cryptocurrency wallets is to make storage seamless and convenient. If you don’t have one, now is the time to do so.
Okereke has a passion for researching blockchain and cryptocurrency. He enjoys creating long form educational content to inform others on the opportunities in this space.