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If you’re a crypto newbie confused by conversations on the temperatures of wallets, then this article is for you.
In short, hot wallets are connected to the internet, and cold wallets are not.
But, what are the benefits of each? Why do most people have both? And what do you need to consider in choosing the right wallet for you?
Let’s examine the pros, cons, and best uses of hot and cold wallets to find out.
If your form of crypto storage is one that is continuously connected to the internet, then you use a hot wallet. There are various types of hot wallets, all with specific advantages and disadvantages.
- Mobile Wallet
Mobile wallets allow you to access your cryptocurrencies on your mobile device. Though mobile wallets allow for greater ease on the go, they carry pretty significant security risks.
If a hacker compromises your phone, wallet encryption will not stop them from stealing your crypto. Mobile wallets are at risk from the malware, keyloggers, and viruses that phones are vulnerable to.
- Web Wallet
Web wallets are wallets accessible through your web browser and boast the fastest transactions. They are ideal for holding limited amounts of crypto. What’s more, some of these wallets are integrated into exchanges and allow one to manage multiple types of tokens in one place.
That being said, web wallets are not for storing large amounts of crypto. Exchanges and web wallets leave you very vulnerable to malware, viruses, keyloggers, and the like. Moreover, phishing scams are common on these sorts of wallets and hackers pay a lot of attention to them.
All in all, web wallets have their purpose. Use this wallet to store small amounts of money and to perform transactions quickly. Gemini and Metamask are both great options.
There are a few different methods for storing your crypto offline in a cold wallet. I will focus on laptop and hardware cold storage.
- Laptop Cold Storage
Many people choose to store their crypto on a laptop they keep offline. This laptop should serve no other purpose than storing your crypto.
Laptop cold storage is ideal for crypto newbies who want greater security than a hot wallet allows, but find other cold storage methods too complicated.
The Xiaomi Air, Huawei MateBook X Pro, and the Apple MacBook Pro are all popular laptops to use as a cold wallet.
- Hardware Cold Storage
This method of cold storage is arguably the most secure, though it may be difficult for beginners to get a handle on.
The three primary hardware wallet brands are Trezor.io, Ledger Nano S, and KeepKey. All three have pros and cons that examining in full necessitates another article. Regardless, all these options give you far greater control over your crypto.
If you are storing your crypto long term: hardware cold storage is hands down your best option.
In Sum: Mix-n-Match Based on Need
Overall, people need both a temporary place to store small sums they can transact quickly and highly secure storage where the bulk of their crypto can be kept uncompromised.
For this reason, the majority of people store their crypto using any number of hot and cold methods, some of which have been examined here.
Your best bet is to educate yourself on the options, evaluate your needs, and go from there.