For storing and transferring Bitcoins, a Bitcoin wallet is necessary. These wallets are software programs where Bitcoins are stored. Bitcoins are stored in a wallet with a lot of information like security private keys to access the Bitcoin addresses and carry out transactions. In short, a digital wallet is a software program that stores private and public keys and interacts with various blockchains to enable users to send and receive digital currency and monitor their balance. There are two types of Bitcoin wallets, Hot wallet and Cold wallet. Even though there are many other varieties of wallets, Hot and Cold wallets are the most popular types of Bitcoin wallets. Let’s see the difference between them and the benefits of using each of them.
What is a Hot Wallet?
Hot Bitcoin wallets are the digital wallets connected to the internet. They are very easy to set up, access and to conduct transactions. But the most important disadvantage of Hot wallets is that they are vulnerable to cyber attacks and hackings. Hot wallets are generally known as digital cryptocurrency wallets. They have been around ever since the inception of Bitcoin. It is simpler to use than cold storage. If you want to protect your wallet from technical vulnerabilities, then you can install two-factor authentication, but even then you are not guaranteed to be 100% protected. Generally, Hot wallets provide a user-friendly interface and while using a hot wallet, the recommended method is to store the minimal amount in it.
What is a Cold Wallet?
Cold wallet is an offline wallet which is more secure than Hot wallet. As they store your Bitcoins offline, they are less vulnerable to cyber attacks and threats. A cold wallet could be one of the best wallets for your cryptocurrency, if you have or plan to buy Bitcoin, or any other currency, and “hodl” for the foreseeable future without trading. Among Cold wallets, the most secure one is Paper wallet. By using a paper wallet, the only way to access your private key would be through this piece of paper where your key is written down. If you lose this paper, then accessing your Bitcoin is impossible.
When comparing hot wallets and cold wallets, cold wallets are better. Because it is less vulnerable to cyber threats. Bad housekeeping or losing the paper where you have written private keys are the only possible ways to lose your bitcoins when you use cold wallets. So the ideal way is to store the majority of your Bitcoin in a cold wallet and just a small amount in a hot wallet. This gives ease and quickness of hot wallets as well as the security of the cold wallets. Even though taking a decision about which wallet is to be used is a private choice. So before purchasing, conduct a personal research on all types of wallets and choose one according to your own needs.