When it comes to keeping your cryptocurrency safe, choosing where to store your digital coins is very important. Users wishing to store significant amounts of crypto often turn to self-custody wallets, which can be of two types: hot and cold. Considered to be among the safest, as access to the phrase from the wallet is granted only to the owner, thereby protecting funds from unauthorized access. Read on to find out what sets hot wallets apart from cold wallets, what pros and cons they have, and which wallet will be the best choice for you.
Hot Wallets
Mainly all web, mobile, or desktop crypto wallets are hot wallets, and one of their advantages is convenience, as they are always connected to the network, which allows users to easily make quick transactions. This accessibility makes them ideal for daily transactions like cryptocurrency trading. However, being constantly connected to the network reduces security, as it increases the risk of online threats. Hot wallets are quite popular as they are free to download, easy to set up and allow to interact with a large number of cryptocurrencies, as well as connect to decentralized exchanges and make instant transactions.
Enhanced functionality features such as token swapping, staking, and direct interactions with decentralized applications (DApps) on various blockchains make hot wallets a versatile tool in the decentralized finance (DeFi) space.
Cold Wallets
Cold wallets, which typically include hardware and paper wallets, are primarily designed to increase security by operating offline. Their absence from the network protects them from online threats such as phishing attacks, making them highly secure options for storing cryptocurrency. Cold wallets are particularly suitable for long-term investments because they minimize exposure to security vulnerabilities common in the online environment.
However, their offline nature means that transactions are not as quick as in the case of hot wallets. In the case of hardware wallets, users typically need to connect their hardware wallet to an internet-connected device to make a transaction. This can make cold wallets less suitable for frequent trading, but great for safely storing large amounts of crypto.
Which Wallet to Choose, Hot or Cold?
The choice between a hot and a cold wallet depends on your specific needs. While hot wallets are usually free and easy to use, making them suitable for those who are just getting started with cryptos, cold wallets are generally not cheap, but provide strong security features that justify the cost. Many users combine both types of wallets, using hot wallets for daily transactions and cold wallets for secure long-term storage, effectively using two types of wallets.
If you are looking for a reliable and feature-rich hot wallet, consider downloading P100, The Digital Money App. It offers a seamless, secure platform for trading and managing digital assets that will make your experience of work with crypto even more satisfying.