Hot Wallet vs Cold Wallet: Managing Your Crypto
Updated: Aug 28, 2021
How you hold your crypto keys is one of the most critical pieces of the crypto conversation, and not many people are talking about it. There are two ways to hold them. First, you could choose to use a hot wallet, which uses the internet to help store customers' private keys for their crypto. Or, you could choose to use a cold wallet, which stores and secures your wallet's keys offline.
Hot wallets are most beneficial for an individual looking to make purchases with their cryptocurrency quickly. The fact that wallets are connected to the internet allows users to transact efficiently. However, hot wallets make the crypto holder more susceptible to having their crypto stolen if the company or the internet server is breached. In 2014, a crypto exchange known as Hex was responsible for holding more than 70% of the cryptocurrencies in the world. In February of that year, Hex's systems were hacked - losing 844,408 Bitcoin that they were responsible for holding. Yet, the people who held their crypto in a cold wallet didn't lose a dime.
Cold wallets are ideal if the user wants to hold their crypto for an extended period of time and the best security for their coins.