The Cold Wallet versus Hot Wallet is not a debate about which wallet is better, but more about understanding the differences between the two as a crypto investor.
Cold Wallet and Hot Wallet have significant differences and suit different types of investors. Knowing the basics of what these wallets do can help you stay secure in the crypto world. Let's understand more about Cold Wallet vs. Hot Wallet.
How Crypto Wallet Works
Before we dive into Cold Wallet and Hot Wallets, it is important to know how a crypto wallet works. Cold and hot wallets are essentially similar when it comes to the basics of wallet operation.
Every wallet starts with a private key. The private key is a set of random numbers and letters that is unique only to you. When you create a new account on the wallet, the private key is randomly generated for you.
To help you remember the private key better and not make any mistakes, the wallet will transform your private keys into mnemonic words. These are a set of random words, 12 or 24 words long, that you will need to immediately note down on paper.
Mnemonics is derived from private keys and is the only backup to your account. Mnemonics will only be shown to you once so it is very important to keep whatever you wrote down safe and secure. We suggest keeping your mnemonics safe using (ELLIPAL METAL).
Private keys are like keys to your account. It approves any transactions that you need to do. It is the access way to your account, that's why it must be kept safe at all costs.
Derived from the private keys as well are the public keys. The public keys are essentially the address for your wallet. You give the address to other people so they can transfer crypto to you. The public key does not need to be kept safe.
Together, private keys and public keys make up a wallet.
Hot Wallet - Free and Easy
Hot wallets are software wallets. They come in a form of computer software or smartphone APP. They are free to download and free to use. Trust Wallet is one of the most famous hot wallets in the world.
Hot wallets are easy to use because it is essentially smartphone APP. It is designed for simple and quick operation. Hot wallets also like come with many cryptocurrency investment features such as buying, trading, staking, DAPP access, and more. Not to mention, hot wallets are incredibly portable because they are just another APP on your smartphone.
Security-wise, hot wallets are not the most secure way to hold your cryptocurrency. If you use a hot wallet on your smartphone, the private keys will be stored inside your phone. If your phone caught malware, it is easy to risk losing your assets.
A smartphone is also always online. If you are targeted by a hacker, they can easily hack your phone remotely and steal your private keys.
Hot wallets are free and simple to use, that is why they are very popular among new crypto traders. They also have many features to help crypto invest fast and efficiently. However, carrying too much crypto on a hot wallet can be a big risk because it does not provide adequate security.
Cold Wallet - Air-gapped Security
Cold wallets are devices that are designed to keep your cryptocurrency as safe as it can be. They keep private keys safe by being air-gapped. One of the most popular cold wallet is the ELLIPAL Titan Cold Wallet.
Air-gapped is a state where a device cannot be connected to any network or other devices. A cold wallet is air-gapped at all times, even during transactions. Because it is air-gapped, there is no pathway to access the inside of the cold wallet and steal the private keys. This is what makes a cold wallet incredibly secure.
Investors who are holding a large amount of crypto like to use cold wallets because they cannot afford to lose their assets. Buying a cold wallet for just $100 to protect $1,000,000 worth of crypto is a very good deal.
Usage-wise, cold wallets are a little less simple than hot wallets because you will need to operate a separate device which may take time to get used to. Apart from that, modern cold wallets have many crypto investment features like buying, trading, staking, using DAPP, and more.
Final Verdict: Hot Wallet or Cold Wallet
Most of the time, the answer would be that it is the best option to use a Cold Wallet because crypto security is very important. However, if you are not an experienced crypto investor without big investments, it might be better to start using a hot wallet because it is free.
Cheaper and easy to use options for cold wallets do exist. ELLIPAL Titan Mini is a very secure cold wallet but it has a very portable size. It comes with a clear touch screen, making it very intuitive to operate the ELLIPAL Titan Mini. It also supports a wide range of blockchains and has all the crypto investing features that you need.