Hot vs Cold Wallet

Hot and Cold Wallets

Tell me the meaning of Hot Wallet?

Generally speaking, a Hot Bank Account is a bank account that is linked directly to an unsecured network. Because hot wallets are always available on networks, this tool is used for sending, receiving and managing tokens. The software also assists in the transfer of the cryptocurrency. Hot wallets for cryptocurrencies contain a set of private and public key, to protect and facilitate secure transactions.

Always accessible on the internet, a warm wallet has a greater chance of a potential attack compared to a cold wallet. Hot wallet is the easiest way to access and store crypto. In a decentralized blockchain ledger, a hot wallet is responsible for managing transactions that are stored in a decentralized blockchain database.

Cryptocurrency Hardware Wallet

The prevalent cryptocurrency hack attacks witnessed in recent years is a concern for many people. Notably, the 2018 Japanese Coincheck exchange hack, where $543 million in crypto assets was stolen,  indicating that an online cryptocurrency wallet can be vulnerable.

It stands to be known that the transfer of files within and across the cryptocurrency platforms is not secure. While you can store private keys on your PC or smartphone, it’s not safe since malicious people or software can easily decrypt them with ease. Therefore, the safest solution is to use a cold wallet to store your keys.

Crypto Cold wallet

What’s a hardware or cold wallet?

Hardware or cold wallets are a particular type of blockchain ecosystem wallet that provides increased security and utility by storing private keys on a safe hardware device ie. Cold wallets. They are regarded to be the safest and most secure components to store your cryptocurrencies.

Encrypted hardware wallet

Why you should use hardware wallets

  1. Significant security

Hardware wallets ensure the safe protection of your assets even when working from a vulnerable computer. They provide extra safety from hacking, phishing, and malware.

  1. Convenience

The beauty with this plug-in device is; it’s a portable key to use to access your bitcoin assets from anywhere in the world. Besides, hardware wallets enable you to login into dApps and regular apps and use them without creating user accounts.

  1. They help keep assets in a central location

It’s possible to work with a variety of cryptocurrency at the same time when using a hardware wallet. These wallets enable you to manage and different backup blockchains such as ethereum, bitcoin, lumens easily.

  1. Wallet to wallet trading

Wallet to wallet traders can now trade safely from hardware wallets as they ensure maximum protection of digital tokens all the time. Instead of making deposits to your exchange wallet, you trade directly from the hardware wallet, saving you time by surpassing fees and delays expected when making withdrawals.

  1. Pin Encryption

Hardware wallets enable you to create an encryption pin only known to you. If a different person tries to gain access, the hardware device will self-destruct itself after the third attempt. Failure to go through will prompt the hardware wallet to delete all public keys and private keys to ensure your funds are safe.

  1. Private keys’ immunity to attacks

You only get to put in your private keys in your hardware device. Since they aren’t stored on the computer, malicious individuals cannot copy or hack them.

Public and Private keys

The difference between cold wallets and hardware wallets

The rise in popularity of cryptocurrency has also given birth to different cryptocurrency wallets.

Most users prefer hardware wallets. But are there any differences between them and other wallets, for instance, cold wallets?

A cold storage wallet is an offline wallet which encrypts all your cryptocurrency in a drive that resembles a hardware wallet. The cryptocurrency holder is the only one with authority to access the data in the cold wallet. On the other hand, hardware wallets enable you to keep your encryption keys, providing safe access to your bitcoins.

Hardware wallets allow users to utilize hardware only when accessing encryption keys. You will require both software and hardware access for cold wallets, which is far safer than traditional storage choices.

Certain exchanges will allow users with a cold wallet to essentially perform transactions for the purposes of carrying out transactions or investing. Beware that this functionality will enable to exchange to have access to your cold wallet key to ensure the ease of use for your next transactions.

The keys are cryptography, giving the user access to the crypto assets. The keys will need to be stored offline to ensure they are not accessed fraudulently. Cold wallets provide safe storage for your cryptocurrency, but remember that if someone lost his/her cold storage or forgot his/her keys they will be unable to return the money.

As a conclusion we believe that cold storage wallets are mostly suitable for long-term cryptocurrency investments, however these might not be the ideal choice for frequent cryptocurrency traders as this will usually require transferring crypto assets from your cold wallet to your hot wallet on the exchange, making it a more lengthy process.

Ledger Nano X - The secure hardware wallet