Difference Between Hot Wallets and Cold Wallets For Cryptocurrencies
Everyday there are a massive number of online scams, hacking, fraud, phishing cases happening all around the world. Therefore, if you don’t want to become such a victim, you should consider extra protection to store your cryptocurrencies. Currently on the market, Hot Wallets and Cold Wallets are very popular methods for crypto owners to use in order to keep their public and private keys safe. Both Hot and Cold storage options have their specific pros and cons, and let’s find out what are the differences between them by following this article. And then you can have the better idea about which storage option to choose to protect your financial future.
Basically, this type of wallets always needs the Internet connection so users can easily access their accounts to track or make online transactions from any devices. You have to firstly download the software or app to your computer, laptop or mobile devices for using the service and then your personal key will be stored on the provider’s servers. However, since you always need to connect your device to the Internet, your wallet is vulnerable to any possible hacking technical issue, or data missing. Even though Hot Wallet is not a 100% secure method and exposed to many online risks, people still choose using it because of many key advantages like below examples:
- User-friendly interfaces
- Easy to use
- More types of crypto tokens are accepted
- Immediate access to crypto coins
- Free of cost
This type of wallets mostly stores the data into the physical devices like hardware wallets, USB flash drives, another offline computer or mobile phone. Since Cold Wallet is completely offline and not connected to the Internet, it is considered the securest way to store your personal private keys. In other words, nobody can have the access to the cryptocurrencies account but the owner. However, such method could be excellent for storage, but nothing is perfect because it has its own disadvantages comparing to the Hot Wallet. Let’s bring out some small weak points:
- Limited options for transactions
- Not all types of crypto tokens are accepted
- Not resistant to the physical damage
- Cost (Could be expensive depending on the type of hardware device)
Which one is better?
There is no correct answer and it all depends on how much you plan to invest on your business because each of them works differently. Cold Wallet could be a good choice for savings and investments due to its offline nature. On the other hand, Hot Wallet is great for quick transactions and payments. Therefore, our best recommendation for you is that you may save most of your funds in a Cold Wallet and keep some in a Hot Wallet for any needed quick transactions in order to fully protect your crypto coins.