Keeping Your Bitcoins Safe: Hot Wallets vs. Cold Wallets

There are basically two general types of wallets to keep your bitcoins, and

other cryptocurrencies, safe. There are cold wallets and hot wallets. In this

article, you’ll find out the pros and cons of each type of wallet so you can

make an informed decision when choosing which wallet to go for.

Hot Wallets

Hot wallets are called hot because they are connected to the Internet which

generally means it’s easier for hackers to hack into and steal your valuable

coins from you. Examples of hot wallets include those free wallets at your

favorite bitcoin exchange website like Coinbase or Kraken, and mobile app

wallets.

Desktop wallets are another form of hot wallets especially if you install it on

a system that’s connected to the Internet. However, you do have control

over your private keys, and you can encrypt your wallet to prevent hacking

attempts. The only downside to desktop wallets is if your computer gets

destroyed or stolen, then you can pretty much say goodbye to your

bitcoins.

There have been many instances of theft in hot wallets. Some hackers

have even managed to steal millions of dollars’ worth of bitcoins! Hot

wallets are great for storing small amounts and transacting on the fly. But if

you’ve got quite a sizeable number of bitcoins, then it’s best to move these

to offline storage or cold wallets.

Cold Wallets

Cold wallets are the preferred storage method of people with a significant

amount of bitcoins. Examples of cold wallet include paper wallets and

hardware wallets. Paper wallets may sound a bit funny at first because

we’re talking about storing digital currencies here, but it’s precisely why it’s

one of the best types of wallet for long-term storage! With paper wallets,

there is zero chance of anyone hacking anything on paper. The downside

is it can be stolen, or it can get burned, or destroyed. To keep your paper

wallet safe, consider putting it in a safe environment like a safety deposit

box.

The second type of cold wallet is the hardware wallet. It’s a physical offline

device that’s pretty much like a glorified USB that can be plugged into your

computer when you need to make a transaction. There are three main

brands that are very popular among crypto owners. These are Trezor,

Ledger Nano, and KeepKey. All three will cost you some money but will

definitely help keep your virtual treasure chest safe.

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