In our world today, everybody wants to own cryptocurrencies. Cryptocurrencies have been described as the money of the future and today, some organizations have bun to accept cryptocurrencies as means of payment. If you own any crypto, you want to make sure they are kept in the best place possible. Since they are digital assets, the only place you can store them is in a digital wallet. Depending on your needs, you can decide to store your crypto assets in a hot wallet or a cold wallet. Both of them have their unique advantages and disadvantages. In this article, we want to take a closer look at both hot wallets and cold wallets so we can see which one is better for you.
What are hot wallets?
Hot wallets are your regular web-based, mobile, and desktop wallets. You open a crypto wallet on any crypto platform and then create a wallet that can be easily accessible from your device. When you want to make an online transaction from a hot wallet, you just need to input the required details and your transaction will go through within minutes. While this means of storage is generally fast and accessible, it leaves your funds vulnerable to attacks from hackers and cybercriminals. Storing a lot of crypto funds in a hot wallet is like walking around with your bank account in your pocket.
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What are cold wallets?
Cold wallets are physical devices used to store crypto assets. These devices are shaped like a USB drive and they are encrypted with high-end software to prevent any form of theft. Any good hacker can find his way into your hot wallet (especially web-based wallets) and steal your funds. However, if someone planned to steal from a cold wallet, he would have to first gain access to the physical device and then coerce the passwords and verifications from the owner of the cold wallet. This is highly unlikely and that is why well-established crypto exchanges keep the majority of their customer\’s funds in cold wallets and withdraw as needed. Even when you plug your cold wallet into the device or the internet, the best hackers in the world still won’t have access to your funds. However, cold wallets are less convenient and you can trade cryptocurrency daily with them.
Which is better?
If you have thousands of dollars in crypto assets, a combination of these two types of wallets will be the perfect option. Hot wallets allow you to trade cryptocurrencies and you can easily access your funds for any transaction. Cold wallets will keep the bulk of your funds safe and you don’t need tout theft or hacking. One common trend that people are beginning to adopt today is to use a separate phone as a cold wallet. Although this method is not as safe as a traditional cold wallet, it is safer than hot wallets. This is because you can switch the phone on when you want to transfer crypto-assets out of your cold wallet and switch it back off when you are done.
Summary
We have already explained what hot wallets and cold wallets are. Both of them have their respective pros and cons and it all depends on your unique needs. If you have a lot of crypto assets, you can decide to opt for both of them so you can enjoy the best of both sides. In the past few years, hot wallets have become more secure with multiple security checks in place and cold wallets have become more convenient with innovations coming from the crypto world. You can blend the best of both worlds and enjoy the crypto space.
