What is the difference between a hot and cold wallet?

A cold wallet and a hot wallet are both stores for your cryptocurrency. The major difference between the two is that cold wallets are not connected to the internet while hot wallets are the opposite. Both are designed for different purposes and, in many instances, people who hold cryptocurrencies have both.

A hot wallet is stored online through platforms that offer a storage service (such as coinbase). It is massively encrypted. With a hot wallet, users have trust in the platform to store and secure their private and public keys. Because it is online, it means access can be gained easily to your cryptocurrency.

A cold wallet is a preferred choice for people who want to have more control over their cryptocurrency because they offer a higher level of security from digital threats, as they are kept offline. They are less or not vulnerable to attacks from online hackers.

There are two major types of cold wallet solutions. Paper and hardware wallets.

  1. A paper wallet is a printout of the private key and public address on a physical piece of paper. They are good for long-term storage, as they are out of reach from hackers.
  2. A hardware wallet is a physical offline device. It is similar to a USB that stores your private keys and can be inserted into your computer when a transaction is needed. It is harder to damage but also needs to be stored in a secure location.

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