Hot Wallet VS Cold Wallet. Which One Is Better & Why?
If you are into crypto space, you must know that hacks are so common. They happen almost every day and millions of dollars in crypto have been lost already. They are never going to stop and notorious hackers will find ways to break the strongest of systems in place. Keeping your crypto on an exchange might be easy and convenient but it comes with a dependency you wouldn't want to have in your life. If you really care about your funds, security should be of utmost importance unless you don't give a shit. ๐ If you are here for the long term, make it at least one of your priorities.
Depending upon the level of security and convenience, wallets are generally divided into two categories: Hot Wallets & Cold Wallets. In this blog, I am going to discuss the differences between the two. In the end, we will see which one of them is better and why so that you can make your decision accordingly.
Difference Between Hot & Cold Wallet
"Call me a hot wallet because I am insecure" ๐๐๐
Yes, I am so insecure about my crypto! This is why a hot wallet was not enough for me. It is connected to the internet so there is a big chance to get hacked or duped even if you own the keys. ๐ I don't trade much so I bought a cold wallet Ledger Nano S to keep my keys secure and offline. ๐ค Let's understand the differences between the two through this great infographic created by the sir fing. Thank me later!
Which One Is Better & Why?
Although it is clear which one is better in terms of security and convenience but honestly, it totally depends on person to person and their required usage. If you are a trader, holding your crypto in the hot wallet can be inconvenient and irritating. Moreover, if you want to spend your crypto for sending funds or buying something then a hot wallet is perfect. All exchange wallets and desktop/software wallets are hot wallets. Yes, Metamask is a hot wallet too. ๐ A cold wallet is generally used to hold assets & investments for a long period of time and you don't generally use it quite often. This means you don't connect it to the internet every other day. ๐ Otherwise it is as good as a hot wallet. Hardware wallets like Trezor & Ledger are good examples. They store the keys that are required to authorize the transactions. Technically they don't store your crypto but information about the funds you hold on the blockchain network & keys. Since you don't connect it to the internet quite often, it is harder to hack them. If you lose it by any chance, you can order another and use your seed phrase to get access to your funds back again. Check out the list of Top 5 Bitcoin Wallets & their Pros/Cons by @beehivetrader.
If you can't afford cold storage, at least store your keys on paper or use a CRYPTOTAG for god-level seed phrase storage. For the lions! ๐ฆ Also follow/read @themarkymark's posts/comments on security and privacy. There's no one else on Hive who has made me care enough about these two.
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