Hot wallet and cold wallet is the name by which virtual wallets are known (in English wallet) where we must store our holdings of Bitcoin and other cryptos that we buyThe differences between these systems are not few, and justify a complete evaluation of the case. Many investors even prefer to rely on both solutions simultaneously for their assets.
If you already have some basic knowledge about cryptos, then we are sure that you will have been minimally interested in the possibility of investing in these digital currencies. Now, not only is the process that allows us to get hold of them important, but when it comes to saving our cryptocurrency assets, We will have to choose a wallet or virtual wallet, between the hot wallet and the cold wallet, but how are they different?
The fact is that our first steps into crypto can be a bit intimidating, and although there is some experience that we can use, or even advice from other people, this initial approach into the crypto world we will remember for a long time. how overwhelming it can be to deal with new technologies.
Unlike physical money, which we all have a specific place where we usually keep it if it is not in our trusted financial institution, with digital there is no choice but to trust a wallet.
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Ways to store our cryptocurrencies
If, as we said, you are making your first transactions with cryptocurrencies, a basic, essential question is «where to store the Bitcoins, Ethereum and altcoins that I just acquired in a cryptocurrency exchange (exchange)?«. Mainly, we will be interested in the money being safe, but also accessible if we need it.
From these requirements, different ways of storing our cryptocurrencies arise momentarily or permanently, which is when these wallets come inso let’s get to know in detail what options we have for now.
Cryptocurrency exchange platforms
The most dynamic way to use cryptocurrencies, or to store them momentarily, are the very platforms that we use to exchange them for other assets, where they will remain until we want to make an operation. As long as we are operating the assets must be there, so they also function as storage. But, most importantly, when your cryptocurrencies are in a centralized exchange, the owner is not really the one who owns their assets, but they are actually in possession of the exchange.
However, as these services are transaction-oriented and not security-orientedand most want to go to sleep peacefully at night, there are wallets, wallets or wallets where to store all the crypto.
The normal procedure would then be to buy the assets, and send them to the wallet to keep it safe.
The most outstanding advantage of hot wallets is that we will have our assets a couple of clicks away, but, on the other hand, the disadvantage is that they are not as secure as we would like to think.
What is a hot wallet?
If we approach the topic from hot wallets, we must say that it is the most common type, one more piece of software in this puzzle, which stores assets such as cloud storage programs.
The most outstanding advantage of this solution is that we will have our assets just a couple of clicks away.as long as we are connected to the Internet, but without limitations regarding the site or the time in which we need them.
In addition, a good percentage of hot wallets are free, and most exchange platforms have their own, so that the transfer of assets is more organic, and you do not have to rely on different sources.
On the other hand, the disadvantage of hot wallets is that they are not as safe as we would like to thinksince we are never exempt from hacks.
So the best solution is cold wallets?
Faced with these security risks, cold wallets appeared, a physical piece of hardware, somewhat similar in appearance to a USB drive such as thumb drives, that stores digital assets within it.
By not being connected to the Internet, we are not in any danger of someone accessing the assets while we are busy doing something else, so we have nothing to fear if we choose to do hodling.
Of course, this alternative has its weak points, such as a cold wallet costs between 100-200 dollars. It may not seem like a lot of money, but that will be closely related to the amount you want to protect. It should be clarified that this value is explained by the fact that these memories are much more resistant.
But probably what discourages some from selecting them is that if there is a problem with the device, all holdings stored inside it are lost, as has already happened and for millions of dollars.
Are wallets an impediment to investing in cryptocurrencies?
Although everything we have mentioned could make you a little scared, keep in mind that things are not better with the physical money that we use on a daily basis. Namely, this should not be a reason not to hold crypto.
We simply have to be careful with our assets and, now that you know the characteristics of each wallet, use the most recommended in each of the casesin order to make the most of its capabilities.
Where do you usually store your cryptocurrencies, in a cold wallet or a hot wallet?