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Hot Wallets vs. Cold Wallets

Updated: Aug 30, 2018

There are basically two general types of wallets to keep your bitcoins, and  other cryptocurrencies, safe. There are cold wallets and hot wallets. In this  article, youíll find out the pros and cons of each type of wallet so you can  make an informed decision when choosing which wallet to go for.





Hot Wallets

Hot wallets are called hot because they are connected to the Internet which  generally means itís easier for hackers to hack into and steal your valuable  coins from you. Examples of hot wallets include those free wallets at your  favorite bitcoin exchange website like Coinbase or Kraken, and mobile app  wallets.


Desktop wallets are another form of hot wallets especially if you install it on  a system thatís connected to the Internet. However, you do have control  over your private keys, and you can encrypt your wallet to prevent hacking  attempts. The only downside to desktop wallets is if your computer gets  destroyed or stolen, then you can pretty much say goodbye to your  bitcoins.


There have been many instances of theft in hot wallets. Some hackers  have even managed to steal millions of dollarsí worth of bitcoins! Hot  wallets are great for storing small amounts and transacting on the fly. But if  youíve got quite a sizeable number of bitcoins, then itís best to move these  to offline storage or cold wallets.


Cold Wallets

Cold wallets are the preferred storage method of people with a significant  amount of bitcoins. Examples of cold wallet include paper wallets and  hardware wallets. Paper wallets may sound a bit funny at first because  weíre talking about storing digital currencies here, but itís precisely why itís  one of the best types of wallet for long-term storage! With paper wallets,  there is zero chance of anyone hacking anything on paper. The downside  is it can be stolen, or it can get burned, or destroyed. To keep your paper  wallet safe, consider putting it in a safe environment like a safety deposit  box.


The second type of cold wallet is the hardware wallet. Itís a physical offline  device thatís pretty much like a glorified USB that can be plugged into your  computer when you need to make a transaction.  There are three main  brands that are very popular among crypto owners. These are Trezor,  Ledger Nano, and KeepKey. All three will cost you some money but will  definitely help keep your virtual treasure chest safe. 


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All blog posts are for informational purposes only.

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