Hot Wallet vs. Cold Wallet
What are the pros and cons of each wallet?
A hot wallet refers to any cryptocurrency wallet connected to the internet. Generally, hot wallets are easier to set up, access, and accept more tokens. But they are also more vulnerable to hacker attacks, possible regulations, and other technical vulnerabilities.
Cold Storage refers to any cryptocurrency wallet that is not connected to the internet. Overall, a cold wallet is more secure, but it doesn’t accept as many cryptocurrencies as hot wallets.
Should I Get a Cold Wallet?
If you are going to own Bitcoin, Ethereum, or other cryptocurrencies worth more than $100, you could buy a cold wallet right now — this is how much it costs.
Maybe you’ve heard people say, “Bitcoin gives you this opportunity of being your own bank”? There are advantages and disadvantages to this responsibility. Generally, cryptocurrencies have fewer middleman fees, less messy banking regulations, etc. Still, it is your responsibility to ensure the safety of your assets.
Overall, as a rule, you should leave as much money in your hot wallet as you would with a traditional leather wallet that you keep in your pocket. Think of it this way, if a thief was about to steal your regular wallet, you would only lose the money you have in your pocket, not the money in your bank account.
In short, here’s an analogy that can help you: a hot wallet can be thought of as a pocket wallet that you walk around town with; a cold wallet is a bank deposit.
Pros & Cons of Hot Wallets
Using a hot wallet will give you the following benefits:
- By entering your pin and access number into the wallet, you quickly access your coins.
- The investment cost is lower.
- It has an extensive portfolio of applications or software that function as a hot wallet.
- You need to set a PIN code or a security code to use it.
- They allow you to connect to any platform so you can operate and trade.
Using one of these wallets may have the following disadvantages:
- Higher risk of theft as money is stored in the cloud and is more vulnerable to cyber crooks.
- It needs to be connected to the internet all the time. Otherwise, it can’t be supported, so it could be a big problem if the internet connection fails.
Pros & Cons of Cold Wallets
Using this wallet will give you the following benefits:
- This type of wallet works without the internet, giving you a high level of security since many thefts take place on the internet.
- A cold wallet supports ERC20 or other tokens standards, which can support an unlimited number of tokens..
- You need to set a PIN code or a security code to use it.
- You can take your device anywhere.
Using one of these wallets may generate the following disadvantages:
- There is a risk of losing your device.
- You cannot trade with these types of devices.
- You need to invest around $100 to get it.
- Like any physical device, it is prone to failure, corruption, or reading problems.
Remember that if you want to trade, a hot wallet is the better option. Still, we recommend encrypting it as best you can and choosing the best software for the most significant security. On the other hand, if you are a non-trading investor and want the highest level of protection, a cold wallet will be a better choice.
We hope we have helped understand the difference between hot and cold wallets. We are confident that you will choose the best option with this information.
FMFW.io has the safe custody — Unique and sophisticated hot/cold wallet system lowers the risk of losing the funds to zero.
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FMFW.io does not provide financial, legal, accounting, or tax advice. Any statement regarding such matters is explanatory and may not be relied upon as definitive advice. All users are advised to consult with their financial, legal, accounting, and tax advisers regarding any potential investment or trading activity.
