hot vs cold cryptocurrency wallets

Hot vs. Cold Wallets – Crypto Storage for Beginners

The volatility of the cryptocurrency market makes it extremely challenging to deal in the short-term, but looking at the long-term performance, we see Bitcoin and other top tokens had performed impressively. Becoming a HODLer implies making a difficult decision: using hot or cold wallets for storage.

Difference between hot and cold wallets

What beginners must know is that hot wallets are connected to the internet and store information on an online server, while cold wallets operate offline. This difference creates an imbalance between security and accessibility of funds stored in a given wallet, raising the question about what type is more suitable.

Cold wallets – the best deal?

Cryptocurrency HOLDers, that want to invest and own particular tokens for at least a few months expecting a major increase in the valuation, generally use cold wallets, thanks to their increased security. However, your private keys will be secure as long as no stranger had possession of the wallet.

In the past two years, both Ledger Nano S and Trezor, popular cold wallets, had proven to have security vulnerabilities. Still, there’s no risk as long as the wallet is kept safe. Despite small flaws, the cold wallet is the best place to store tokens, as long as the objective is to hold the tokens for an extended period of time.

Hot wallets usage

Some people want to work with cryptocurrencies short-term or even use them in commercial transactions, now that plenty of stores accept crypto as a medium of exchange. In this case, storing all tokens on a cold wallet will make the process harder, which is why hot wallets step in.

Whether we talk about mobile apps or desktop wallets, a hot wallet allows faster access to cryptocurrencies, but come with some security flaws. Since the data is stored on a server, tokens are vulnerable to hacking. However, multiple levels of authentication (Google Authenticator, fingerprint scanner, etc.) can provide a greater degree of security.

Since both wallets types are suited for particular activities, it all comes down to each individual’s objectives. A cold wallet is the best choice for a HODLer investing in the long run, while a hot wallet for someone using cryptocurrencies on a constant basis.

Most of the time, people choose a combination of both wallet types, keeping a part of the tokens in cold storage and the rest in hot storage. All security flaws can be prevented as long as users take precautions to avoid unwanted situations from happening.