Crypto Wallets

Where do you store your freshly acquired cryptocurrency?

What's the difference between a hot wallet and a cold wallet?

Understanding Wallets

Cryptocurrency wallets are used to store the account's public and private keys, keep track of the balance, perform sending and receiving currency transactions, as well as other blockchain features. Wallets are split into two categories: hot wallets and cold wallets. Hot wallets are accounts on online websites focused on cryptocurrency exchanges, or accounts. Cold wallets are offline-stored accounts: software, hardware, or paper. Therefore, traders are recommended to use cold wallets in order to shield sensitive data from being publicly exposed and vulnerable to hackers. For cold wallets, account keys needed to access cryptocurrencies are only used and subsequently disconnected when trading takes place. Holding and maintaining a cold physical wallet in a secure location means that only you have access to your account and all your funds.

When you decide hot wallet vs. cold wallet, you need to consider the balance you need between accessibility and protection. It is worth remembering that you do not have to select either a hot wallet or a cold wallet solution definitively, you can store a percentage of your funds in each one to mitigate risk while retaining accessibility as required.

Cold wallet

It's better to store them offline in a cold wallet for any cryptocurrency assets you don't need direct access to. In cryptography, maintaining high standards of security is key.

There are distinct cold wallet options, such as a hardware wallet or a paper wallet. An external gadget such as a Ledger Nano S or Trezor that stores your private keys is a hardware wallet. To complete a transaction, you must press a button, so hackers can not take charge. Wallet access to hardware is hidden behind a password or pin. In general, as long as you have access to the bank, the funds saved on a hardware wallet are reasonably available.

A paper wallet is a print out of the private key and public address on a sheet of paper or some material. As the document can be lost or someone can easily find it and access your funds, this is generally considered a risky form of cold storage.

Another cold storage option is to use a secure crypto exchange, where all customer funds are kept in cold storage.

Hot wallet

Hot wallets are more prevalent, but they pose a greater risk. For the Ethereum network, there are a number of common hot wallets which work on your web browser, such as MyEtherWallet. If you download a wallet to your desktop or your computer, since it is linked to the internet, that's also a hot wallet.

At least to some degree, most exchanges use hot wallets. This enables user funds to be accessed easily. It also means, though, that if you store your funds on an exchange with these strategies, those funds may be at risk. Wallets are related to the Internet, so malicious people and hackers are still targeting them.

Choosing a cold or hot wallet

This question has no clear answer. To determine their requirements, every cryptocurrency user needs to. If you just want to keep it, cold storage is the way to go. Consider a hot wallet if you intend to conduct major trades in the immediate future. Store funds in both hot and cold storage if you are going to do a bit of both, or if you want to trade but minimize risk.

It doesn't actually mean that storing crypto in a hot wallet is dangerous, it just means that your funds are more at risk of hacking. Using the various types of wallets as much as you can to minimize risk while retaining the access you need.

Keeping your wallets safe Tips

You are self-responsible for storing your private keys safely to protect your cryptocurrency funds until you have your funds deposited in your private wallet(s). To learn how you can keep your funds safe, read on.

Using Two-Factor authentication

A easy but effective way to secure your confidential details when you sign into your account is to allow two-factor authentication (2FA) on your wallet. You can opt to use the Google Authentication mobile app with a six-digit fingerprint code that refreshes every minute, or a biometric fingerprint identifier such as a touch ID.

Separation of the funds

Placing your funds in different wallets instead of one location is advisable. For short-term usage in trading and exchange, you can keep your funds separately in a hot wallet, and in at least one cold wallet to store your funds safely in the long run. You can not retain your funds in return for an extended period of time until you complete your transactions.

Beware of Websites and Emails for Phishing

A myriad of Google Ads and emails for phishing are getting more and more elaborate and compelling. Before you enter your details to log in to your account, you should always double-check the address of the exchanges' websites and emails. Pay attention to whether websites have proper HTTPS certificates and a lock symbol next to the url, instead of just HTTP.

Check the Address

Double-check the crypto address before making any payment transaction to make sure that you are sending funds to the right location. This is to prevent malicious programs from modifying and pasting the address of a hacker as the receiver of your transaction.

Use a Separate Non-Public Email Address for Your Accounts

Some hackers can still manage to crack your wallets, even though you keep your funds in cold storage. You can use a different email address from your usual personal or work usage, set a strong password, and allow 2FA to log in to your email address.

Regularly Update Your Device Software

Installing anti-virus software is a smart decision to take in order to protect your computers from possible malware attacks. It will make your devices less vulnerable to such attacks by getting regular software updates and virus scans.

It's important for you to know how to safely and securely handle your cryptocurrencies. There are several tips that will help you become more knowledgeable about enhancing your online security and securing your wallets.