Should I use a hot wallet or a cold wallet to store cryptocurrencies?
Hot wallets are easily accessible, compatible with many coins and tokens, but potentially vulnerable to hackers. Cold wallets are safe, but users have to pay extra.
When you join the crypto room, users will need a wallet to store them. There are currently two popular types of cryptocurrency wallets: hot wallets and cold wallets. Both have different advantages and disadvantages.
The main difference is that hot wallets are connected to the internet while cold wallets are not. Hence, cold wallets are seen as a safer way to store digital assets. However, users have to spend large sums of money to buy hardware.
Hot wallets are easy to use, but they have potential security risks
Hot wallets are the most popular crypto wallets because they are easy to create and use. When users create an account with an exchange or download a wallet on their phone or computer, those are all hot wallets.
According to CoinMarketCap, hot wallets are usually intended for investors who trade coins on a daily basis because they are easy to use and connected to the internet. There are many types of hot wallets on the market, such as Coin98 Wallet, Trust Wallet, SafePal, Metamask and wallets integrated directly into the exchange.
Top exchanges usually store the majority of users’ coins in cold wallets for added security. Web or mobile hot wallets usually do not have this feature.
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Hot wallets are used by many investors. |
In response to us, Mr. Nguyen The Vinh, CEO and Co-Founder of Coin98 Finance, said that the advantage of hot wallets is that they are free and users don’t have to pay any money for initialization.
“The hot wallet is completely free. At the same time, users can easily interact with digital assets when using hot wallets, ”said Vinh.
Since it is connected to the internet, using a hot wallet is very convenient. Users can connect directly to decentralized exchanges, DApps, to take part in staking, exchange tokens … At the same time, investors with a multichain (multi-chain) wallet can store every coin or token on the respective blockchains.
In contrast, the disadvantages of hot wallets often revolve around security. According to CoinMarketCap, storing cryptocurrencies on hot wallets carries the risk of hackers attacking and appropriating assets.
Lately, there have been many cases of asset loss in cryptocurrency investment groups due to wallets being linked to fake exchange sites and coin exchange projects. Fraudsters often create these sites to collect wallet security keys (passphrases).
Therefore, users need to carefully study the website and related information before making any transaction so as not to fall victim to fraud. In addition, investors must keep the key in a safe place, preferably away from the internet.
Cold wallets are safe, but expensive
According to CoinMarketCap, cold wallets are considered a secure solution for storing cryptocurrencies because they are separated from the internet. Users only connect the wallet to the network when they need to conduct transactions.
Paper wallets and hardware wallets are both classified as cold wallets. However, hardware wallets are more popular because they have separate software and manufacturer-provided customer support.
A hardware wallet is a physical medium in the form of a USB stick. In order to store cryptocurrencies in hardware wallets, users have to transfer assets from hot wallets to hardware wallets via the respective address.
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Hardware wallets take the form of a USB stick. Photo: CryptoAst. |
Conversely, if users want to send or make a transaction, they have to connect the wallet to the Internet using special software and confirm the transaction with a private key.
Paper wallets work in a similar way to hardware wallets. However, this is just a piece of paper that contains the wallet’s public address and private key. Hence, users need to keep this type of wallet in a safe place to avoid theft.
In response to us, Mr Nguyen told The Vinh that the downside of cold wallets is limited support for tokens and high prices.
“Cold wallets are quite expensive and complicated to use. However, users don’t have to interact directly with the wallet’s security code, so it’s more secure,” said Vinh.
There are many types of hardware wallets for sale in the market, with prices ranging from VND 1.6 million to 4 million. Ledger Nano X, Trazor Model T, CoolWallet Pro, KeepKey are the top rated cold wallet models of 2021.
A khang
ZING