There are hot wallets and cold wallets. Hot wallets like Desktop wallets, Mobile wallets, Hybrid wallets, etc. On the other hand, Paper wallets come in the category of cold wallets.
But the point of concern is crypto cold wallet vs hot wallet, which one to go with? Which is the right way for crypto that you must go with in order to gain both security and profit?
Well, let us discuss all, in this resolute dossier.
When it comes to the right way for crypto it all depends upon your needs. Let us understand this from an expert’s point of view.
Storing a cryptocurrency is not an easy task. Although you can store it on an exchange or in a digital wallet. Each carries its own benefits, technical requirements, and security.
If we talk about the cold wallets, it is entirely offline. According to Thomas Beek (Senior Cyber Security Specialist), it demands either writing down the private address on a piece of paper that can only be accessed by the owner or purchasing a physical device that can store cryptocurrency funds while providing the required security.
It is good to store crypto in cold wallets as you are going to get higher security and peace of mind but if you are an active trader, these wallets may not serve you best. It took a lot of time to store your cryptocurrencies. Moreover, if you are an active trader then you have to go through the process of consistently transferring funds between exchange and cold wallet. This can incur repetitive withdrawal fees.
Hot wallets are connected to the internet all the time. So it facilitates easier access and provides an ability to trade and buy other cryptocurrencies more conveniently. This is ideal for trade investors. But hot wallets are not as secure as cold wallets. There is a threat to both your public and private address. This is where things start turning around as significant loss of funds has resulted in the past following the successful breach of an exchange.
It demands a continuous evaluation of the funds as hackers are always eager to target large exchanges. This is even getting more with the increase in the number of retail investors. It doesn’t matter whether a platform is centralized or decentralized, if the proper storage process is not implemented the way it has to be, a threat from a potential attack is always at the peak.
Which wallet to go with?
Well, you must have got an idea about the potential risks and benefits of going with both cold wallets and hot wallets. This whole depends upon your needs. For example, If you are planning to buy an “HODL” Bitcoin, it is better to go with a cold wallet as security and peace of mind should be your preference. On the other hand, if you are a regular crypto spender, it will be good for you to hold some of your crypto on a mobile wallet. In this case, a hot wallet is the one you can go with.
But one thing that you need to take care of is, going with a non-custodial wallet where you are holding your private keys. This will let you have complete control over your funds.
Is it good to spread crypto through different kinds of wallets or keep them all in one kind?
Well, storing crypto in one kind could be a bad idea.
You might be wondering why?
Let us understand this through an incident that took place in the year 2018. A long-dormant bitcoin wallet suddenly shows rapid signs of activity. Although there were millions of BTC wallet addresses there in the market, there was something unique in this. This wallet was a house of 111,000 BTC and an equivalent amount of Bitcoin cash. Now as the wallet’s owner remains elusive but blockchain ledgers individuals around the world have been able to watch the activity where funds were flowing out periodically for the past few weeks.
This clearly explains why keeping all crypto in a single kind involves a higher risk of loss.
On the other hand, diversification is the key as even if a security breach occurs on a single or even two wallets, the rest will be safe and you will not lose all.
When it comes to storing crypto in wallets you are required to go for proper research. This will let you know which wallet fulfills your maximum needs keeping in mind that it is secure enough to let you enjoy a piece of mind. After all, it is your hard-earned money and you have to carry the responsibility to keep it safe rather than simply rely on technology.