Compare Hot Wallet and Cold Wallet, which one should you use?

As we use cryptocurrencies more, we will come up with more efficient means of storing currency.

The traditional banking system has taught us an important lesson – whatever you do, keeping money is more important than making money. That's why banks have bulletproof doors, security guards, vaults, safes, sophisticated biometric scanners and sensors, and more.

You can now operate a financial model that eliminates suspicious middlemen, exorbitant remittance fees and superfast transaction speeds. Cryptocurrencies have made all of this possible. How do you store these cryptocurrencies? A crypto wallet!

What is an e-wallet?

Like a regular wallet where you keep your cash, a crypto wallet is a means for you to store your digital currency. There are two different types of wallets. We have hot wallet and cold wallet. Every wallet has its pros and cons and an Achilles heel, and choosing the best wallet is just a matter of getting the full information on each wallet.

Hot wallet

Hot wallets or soft wallets are like checking accounts – where individuals can easily access their funds, make payments and make transactions instantly. It is always connected to the internet and this ensures accessibility. However, this particular feature can be a harbinger of misfortune.

A hot wallet is always connected to the internet and this gives some hackers enough time to carry out their fraudulent activities. Incidents like scams and hacks are becoming increasingly common these days, so crypto users should limit the amount they store on a hot wallet.

There are three main features of soft wallets.

+Free

+Easy access

+Easy to use

+Always connected to the internet

Cold wallet

Cold wallets, on the other hand, are more secure. This is partly because it is not used as often as a hot wallet. Also, security can be attributed to the actual non-live internet connection (it is an offline storage). If you like, you can access the money only once a year – it stays intact. Cold wallets can be paper wallets or hardware wallets.

Paper wallet

Storing your coins in a paper wallet is like storing your money on a computer that has never been connected to the Internet. They are extremely secure since the computer used to generate the private key is not vulnerable to cyber attacks. It's free and gives you confidence that your money will be safe for a very long time.

Hardware wallet

When you compare cold wallets to hot wallets, the former is likely to outperform due to the security features of the hardware wallet. They are powerful, convenient, and yet expensive. Although they are not very popular, these wallets are a great option.

Compare hot and cold wallets

Now let's go through the different features of hot and cold wallets. Both wallets are built for different purposes, so this comparison should be as objective as possible.

Safe

When we talk about safety, a hot wallet is not quite the best choice. This is because it is always connected to the internet and this makes it vulnerable to hacks, scams, etc.

Transaction speed

Hot wallets are specially made for instant payments, fast transactions and flexible operation. Cold wallets, on the other hand, are created to hold large amounts of coins for a long time. When we compare cold wallet with hot wallet, hot wallet gives faster transaction time.

Support and integration

Due to the nature of hot wallets, they are made to support a wide variety of coins, working well with APIs and other required third-party integrations.

Amount can work

Hot wallets should not hold more coins than necessary while cold wallets can hold as much as you want. This makes cold wallets superior for storing large amounts.

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