Cold or hot wallets – what is better to store your crypto funds?
Practical acquaintance with the world of cryptography begins with the choice of a wallet. And the choice depends not so much on whether you prefer HBAR vs XLM, but on your goals for acquiring cryptocurrency. Storages for cryptocurrencies are conditionally divided into cold and hot.
There is simply no universal solution for all occasions. Therefore, each of the storage options is a kind of compromise between the key characteristics of the storage.
Cold stores are often small physical devices. Hot or software are delivered in the form of desktop, mobile or browser versions of the program. The same group includes all exchange crypto wallets that are created automatically after registering an account on the trading platform.
Cold wallets for cryptocurrency
Cold stores are those for cryptocurrencies that do not have a permanent connection to the Internet. This approach eliminates remote theft of assets, but is not very convenient for everyday use of coins.
As a rule, this is a small physical device, although software versions can also be converted to cold storage. Objectively, a hardware wallet is more physically vulnerable. It can be easily lost, so it would be wise to keep it in a safe place.
Cold wallet developers provide for the ability to restore access to assets in case of loss or damage to the main device. To do this, during the setup process, the user is asked to write down and save the seed phrase.
The functionality of cold storage is not limited to storing, receiving and transferring crypto assets. In some models, a direct conversion of USD to ADS is available when buying from bank cards.
Cold wallets are the best choice for storing large amounts of cryptocurrency for a long period. Keep in mind that the issue price starts at about $60 and trying to save money by buying a used device is clearly not worth it. For regular operations with crypto, cold storage is not convenient, which does not prevent you from starting a software storage for these purposes with the functions you need.
Hot wallets for cryptocurrency
The hot option for storing cryptocurrencies involves a permanent connection of the storage with a web service. Digital assets are available for work anytime and anywhere where there is an Internet connection. A persistent connection provides more convenience for everyday use of cryptocurrencies, but at the same time becomes a potential vulnerability for remote threats.
Which storage method to choose
We are back to the starting point again. Crypto can be simply stored and accumulated for a brighter future or as a financial cushion. If this is about you, then cold storage is more preferable.
Convenience and ease of access is more important when it comes to active everyday use of crypto. Active trading or purchases with cryptocurrencies will be much easier if you use a hot wallet. In practice, many users have several wallets for different purposes.
When choosing a storage for cryptocurrencies, pay attention to the following parameters:
- The availability of storing the desired coin in the desired service.
- Availability of a downloadable version of the crypto wallet for the operating system of your phone or desktop.
- Convenience of the interface.
- Degree of anonymity. Separate wallets for many features and limit increases require full verification.
- Obtaining private keys and a secret phrase inside the account.
- Additional opportunities for passive income.
- The presence of a built-in exchange of crypto assets.
- The level of commission for transfers.
- Availability of storage of NFT tokens.
Your very first crypto wallet can be extremely simple, as long as it meets your needs.