Many investors today have lost their digital assets to hackers because they used a vulnerable wallet in storing their assets. Others who used a cold wallet have often found that their transactions are usually delayed as it is not linked to the internet. This work will help you understand the difference between a hot and cold wallet. This will make it easy for you to decide which form of wallet is best for you to store your digital assets today.
Meaning of wallet
A wallet is a coded device that allows users to store their digital assets using secure private keys. Wallets provide a safe landing for cryptocurrency and without them, it will be impossible to send or receive Cryptocurrency.
Meaning of Hot wallet
Hot wallets are the most popular form of wallets today which functions through the internet. They have strong encryptions also known as wallet addresses for sending and receiving cryptos. The hot wallets are usually secured with private keys and backup codes. However, one major disadvantage of using the hot wallet is that they are highly vulnerable to attacks and hacking.
Meaning of cold wallet
Cold wallets are those wallets that do not require the internet to work. They function offline which makes them more secure than cold wallets. Cold wallets are usually hardware devices with storage capacity and secured with private keys and passwords. The cold wallet is often more secure and difficult to hack as it is not connected to the internet.
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Types of hot wallet
There are five types of hot wallets. We have discussed them below.
- A. Exchange Wallet: This is the wallet issued by various crypto exchanges for holding different cryptocurrencies on their platforms. Examples of exchange wallets are Binance wallet, eToro wallet, Kucoin wallet, Gemini wallet, etc.
- B. Desktop Wallet: This type of wallet comes in the form of storage applications downloaded on desktops or computers. Examples of desktop wallets are Exodus, Multibit, Armory, and Bitcoin Core.
- C. Online Wallet: This type of wallet is usually accessed through the web. It is dependent on the internet to function. Examples of online wallets are Nifty wallet, GreenAddress, Metamask, etc.
- D. Paper Wallet: The Paper wallet is an old form of wallet that prints all transactions carried out on them for security purposes. This type of wallet is more secure than other hot wallets and difficult to hack. Examples of this type of wallet are: BitAddress.org and Bitcoin Armory.
- E. Mobile Wallets: Mobile wallets are portable wallets built on a sophisticated application and adopted for smartphones. Examples of mobile wallets are: Electrum, BreadWallet Jaxx, CoPay, and Mycelium.
Types of cold wallet
Hardware Wallet: This is an offline wallet that enables users to store their digital assets on a physical device. The hardware Wallet is often seen as the most secure form of wallet as it is not connected to the internet which makes it difficult for hackers to attack it. Examples of hardware wallets are: Trezor Model T-Next Generation, D’CENT Biometric Wallet, SecuX V20, SecuX W20, Trezor Model One, Ledger Nano S, SafePal S1, Steel Bitcoin Wallet for Hardware Wallet Backup, etc.
Major difference between a hot wallet and cold wallet
|Needs the internet to function
|Does not need the internet to function
|Prone to attack and hacking
|Difficult to attack nor hack
|Slow in carrying out transactions
|Very fast in carrying out transactions
|Needs steady maintenance
|Only needs the internet to work
|Often very expensive to purchase
|Often bulky and not easy to move.