Understanding the Difference Between a Hot Wallet and Cold Wallet
A digital wallet is essential for you to send, receive and store crypto assets whether you are new to crypto market or an active trader of cryptocurrencies. The two most important characteristics that need to be considered during cryptocurrency wallet development are security and convenience. For developing the wallet, you should precisely choose best wallet development company that provides both — world-class security and user-friendly design.
Cryptocurrency wallets can be broadly categorized into hot wallets and cold wallets. For understand their difference, let’s first comprehend cryptocurrency wallet.
What is a cryptocurrency wallet?
Cryptocurrency wallets are digital wallets that provide you with access to your crypto assets. They store your private and the public keys and help you to monitor your balance. Crypto wallets work on the same lines of physical wallets, but crypto wallets store cryptocurrency instead of fiat currency. The relevance of cryptocurrency wallet is to leverage its full potential to keep your currencies safe and secure.
Now as we have understood the basic meaning of cryptocurrency wallets, let’s move further to understanding the difference between hot wallets and cold wallets.
Hot wallets are connected to the internet and their private keys are stored on the server, allowing easy access to your cryptocurrencies. These wallets are provided by exchange platforms, browser extensions, desktop software, or mobile apps (designed for Android and iOS devices). The transactions in the hot wallets are processed instantly.
As the funds are stored on the server thus ensuring the security of a hot wallet is extremely essential. For developing a hot wallet, you should seek reliable cryptocurrency wallet development services.
Pros of a hot wallet:
- Funds are highly accessible
- These are connected to the server and have user-friendly interface
Cons of a hot wallet:
- Hot wallets are weak in security
- Hot wallets are more vulnerable to hacking and funds can get stolen with less chance of recovery
- They are more prone to phishing
When to use a hot wallet?
- If you regularly use cryptocurrency as a means of payment
- If you are an active cryptocurrency trader
Cold wallets are the offline wallets that are not connected to the internet, which makes them less vulnerable to unauthorized access and protects your wallet from cyber hacking and other hacks on the web.
The main types are hardware wallets and paper wallets which are usually kept offline and have the ability to get connected to the internet when needed. Cold wallets are comparatively secure as they ask each time to confirm your transaction when you proceed further.
Pros of a cold wallet:
- Cold wallets are highly secure
- These are not connected to the internet, thus makes it hacker-proof
- User has full control over the wallet
Cons of a cold wallet:
- Not connected to the internet, which makes it inconvenient for daily crypto users
- Funds are less accessible
- Cold wallets have complicated interface
When to use a cold wallet?
- If you are purchasing crypto for a high sum of money
- If you are a long term investor
- If you are technically sound as these are not too user-friendly
It’s not easy to say which kind of wallet is better, the hot wallet or the cold wallet as both have their own set of advantages and disadvantages. The choice of a wallet depends upon your needs; for example, if you are into active trading of crypto assets then hot wallets should be considered or if your purpose is utmost security and to HODL your crypto assets then cold wallets should be considered.
Regardless of your choice, ensure to connect with an experienced company for reliable and hassle-free cryptocurrency wallet development services.