Good morning traders and cryptoenthusiasts! Last week i happened to speak with a user in our chat and it came out, that he was not aware of the difference between hot and cold wallets. So i started thinking, there are probably many users, who have heard those terms, but not bothered to understand, as it might be too technical for them.
Trying not to burden anyone with complex explanations, i will try to recap this in layman terms and maybe a few examples. If you're lazy, head below to the Summary.
credz: pixabay
Hot wallets. Hot wallets are constantly connected to the internet and available at all times. For example if you keep your cryptocoins in an exchange wallet, you are keeping them in a hot wallet. Same goes to all other internet-connected wallets, whether it's an exchange or a cloud, desktop or mobile wallet. Storing most of your cryptos in an exchange wallet is not a safe practice though - they keep your private keys in their own databases and never give them out. Private keys are the only way to claim ownership of your cryptos.
If you need to keep your cryptos in a hot Wallet, you might look into desktop software - for example Exodus Wallet. Exodus is an easy-to-use desktop wallet, and is able to hold various cryptos. Visit their site and get it for free here https://www.exodus.io
Pros: easy to access, easy to use
Cons: cybercrime (oh, these exchanges have been falling like flies). One of the most notorious thefts was Bitfinex in 2016, where almost 120 000 Bitcoins were stolen. The fallout saw the price of Bitcoin fall approximately 20%.
A display of a paper wallet via blockgeeks
Cold wallets. Cold wallets are wallets, that are not online all the time. These can be divided into hardware and paper wallets. Harware wallets usually come in the form of a small USB-sticks - for example Trezor, Ledger, Keepkey. Use them via connecting to your computer.
Second type of cold wallet is paper wallets, where you print out your private and public key, often with the additional form of a QR-code. One can generate a paper wallet in multiple places - https://walletgenerator.net/, https://bitcoinpaperwallet.com/ are one of the few, that spring into mind. They give you a downloadable .html file, then you shut off your internet and generate the keys. Print the paper out and shelve for long-term hodloring.
Pros: debatably the most secure form of keeping your cryptos. Excellent for long-term hodloring.
Cons: can be damaged by external factors, lost, stolen. Not the most convenient to use.
Summary & some things to point out:
Hot wallets - online (exchanges, cloud wallets, desktop software wallets, mobile wallets etc).
Cold wallets - offline (hardware, mostly USB stick wallets, paper wallets).
Most exchanges should be holding now most of their funds also in cold wallets, keeping only the amount needed to fulfill daily withdrawals on their online exchange. Some yet don't though and that can kick back against them and their users.
Never buy a pre-owned hardware wallet - who knows who else has the private keys.
The material you store your cold wallet on, is important as well. Paper degrades overtime, ink might be scraped off plastic etc.
Nothing can guarantee 100% security. Diversify. Keep everyday funds on a hot wallet and longer term holdings on a cold wallet.
Have a lot of Steem? You can generate a paper wallet for your Steem too. Check the post by @xeroc and give him much praise for it. Don't forget to be offline at the time of generating keys.
There are banks and companies offering digitalstorage vaults for your precious cryptocurrencies as well. Take a look at the article at ccn.com
Via ccn.com
Check out Chainbb, an alternative frontend for STEEM network. If you like forum style, that's the platform for you.
Title image from pixabay
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Excellent.
Much thanks to you for posting this, I have never heard those terms since I have just utilized one wallet the previous couple of years. Presently I have a couple of more devices in my sack.
empty wallets...
so much saidd about hot wallets :p
When the sun throws off a super flare you can kiss all the cryptos good bye. Even the paper ones. No computers will work to tade cryptos except in military bases deep underground.
Good point! Also if the sky falls down, the wallets will be gone :(
so far we have airs in the wallets :P
Thank you for posting this, I have never heard those terms since I have only used one wallet the past few years. Now I have a few more tools in my bag. Thank you again!
its really helpfull post buddy. How are you ?
Great post @furious-one. Honestly I first time heard about cold wallet thing.
You've done great job nice write up @furious-one I can't access discord chat any help
@Furious-one ....cold wallet..
! Ahaan that sounds great...i came through the stuff like this for the first time....itz very important stuff....thankyou fr your valuable time and post
Your every post is brilliant and I follow u thanks for sharing
Thanks for this worth a follow. I enjoyed it, Keep up the good work.
Jroh edukasi nyan mantapp 👍
This is my second day on steemit and I think this is the best post I have read so far. Thank you for the knowledge!
Eye-catching post.
learned new things about wallets.this technology has so much to offer indeed.. thank you for the post.
Thanks for the informative article cleared up some things for me.