Hot and cold cryptocurrency wallets

Cryptocurrency transactions are impossible without a cryptocurrency wallet. Whatever asset you use - bitcoin, ether, lightcoin or any other, you simply cannot do without a special wallet for them.

So what kind of cryptocurrency wallets exist, and which one is best to choose?

Hot and cold cryptocurrency wallets

All cryptocurrency wallets, regardless of what assets they are designed for, are divided into two types - hot and cold.

No, a hot wallet will not burn you, and a cold one cannot be put on your forehead in the heat. These slang terms indicate the fundamental difference between the two ways of storing cryptocurrency.

Despite the same purpose - storing cryptocurrency - the purpose of hot and cold wallets is different. To better understand this difference, we can give the following analogy.

You keep a large amount of money, for example, your "rainy day" savings, in a safe (safe deposit box, under your mattress). When you go to the store, you don't carry all your savings with you, but use a wallet that contains a much smaller amount. A safe or safety deposit box is a cold wallet, while your everyday wallet is hot.

Now that things are a little clearer, let's take a look at the 5 species cryptocurrency wallets hot and cold types with their advantages and benefits.

Online wallet for bitcoin and cryptocurrencies

Online wallet refers to the hot type. It is accessed through a browser installed on your computer and does not require any additional software.

Advantages of online wallets:

• Online wallets have the fastest transaction speeds;
• are the optimal way to store small amounts of cryptocurrency;
• many online wallets are multi-currency;
• integration into cryptocurrency exchanges is available;
• the ability to use various anonymizers.

Disadvantages of online wallets:

• Cryptocurrency is not stored on your computer, but on a third-party server;
• high vulnerability. Online wallets are a favorite prey of attackers because they have the lowest level of security compared to other wallets.

Mobile cryptocurrency wallets

Mobile wallets are also hot and are the same online wallets, but optimized for mobile devices - smartphones, tablets, etc.

Advantages of mobile wallets:

• ideal solution for frequent transactions. Practically, an analog of a regular wallet;
• availability of additional services and facilities, such as the use of QR code.

Disadvantages of mobile cryptocurrency wallets:

• high risk of malware infection on your smartphone;
• If you lose your smartphone, it won't cost attackers anything to hack into it and access your cryptocurrency.

Desktop (computer) wallets

Another type of hot wallets are desktop wallets. They are special software that is installed on your computer, with the help of which you can make transactions with cryptocurrency.

Advantages of desktop wallets:

• are easy enough to use and will not cause difficulties even for beginners;
• have the highest level of protection compared to online and mobile wallets;
• private keys are stored on your computer's disk.

Disadvantages of desktop wallets:

• lack of key backup in case of computer failure will result in loss of access to the wallet;
• When you give your computer or laptop for repair, your wallet can be used by people who are not pure of hand;
• just like the system installed on your computer, desktop wallet is susceptible to malware;
• some desktop wallets require additional installation of rather large security certificates.

Hardware cryptocurrency wallets

Hardware crypto wallets are already a cold type of wallet. As you can understand from the name, it is a separate device, not connected to the Internet, on which your cryptocurrency is stored. Such wallets can be both stationary and portable, for example, in the form of a watch. The closest analogy is an external hard drive for a computer, on which many people store family photo and video archives or some important data or documents.

It is quite difficult to make frequent transactions with a hardware wallet, so it is an ideal solution for long-term storage of cryptocurrency.

Advantages of hardware wallets:

• Due to the lack of network connectivity, they have a high level of security;
• are great for storing large amounts of cryptocurrency;
• modern models of hardware cryptocurrency wallets have a display, which saves you from the need for constant connection to a computer.

Disadvantages of hardware wallets:

• some stationary wallets can be bulky;
• theoretical susceptibility of hardware wallets to standard "diseases" of all electronic devices. For example, a strong electromagnetic pulse can disrupt the wallet's operation.

Paper cryptocurrency wallet

It may look ridiculous, but there is another kind of cold wallet for cryptocurrencies - the paper wallet. In the era of maturing digital assets, it was paper wallets that were the standard way of storing cryptocurrencies.

Essentially, a paper cryptocurrency wallet is just a piece of paper on which your private key is printed. Your key is not stored anywhere else except on this sheet of paper.

Advantages of a paper cryptocurrency wallet:

• the highest level of security - the private key is stored only with you in a single copy;
• An ideal way to store large sums of money in cryptocurrency;
• accessibility of conducting transactions by means of QR code.

Disadvantages of a paper cryptocurrency wallet:

• is not suitable for frequent transactions due to the cumbersome nature of the procedure itself;
• If you lose your paper wallet or the paper is damaged in some way - you can say goodbye to your cryptocurrency savings forever.

Now that you know about all types and kinds of cryptocurrency wallets, you can weigh the pros and cons and boldly choose the right one for you.

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