Everyone participating in the crypto market has heard the terms hot wallet and cold wallet, but they do not know which type of wallet to choose according to their needs. So what are hot wallets and cold wallets? Which type of wallet should I choose to suit each person’s needs?
What Are Hot Wallets and Cold Wallets?
What is a hot wallet?
Hot wallet is a type of wallet that helps users store their crypto and display it through third-party software like Metamask when connected to the network. Currently, thanks to its convenience, the number of hot wallet users is the largest in the crypto market.
Hot wallets are typically accessed through online platforms or mobile applications. This allows people to easily make transactions, check balances, and manage their crypto assets. However, this is also risky because if access information is leaked or the hot wallet is attacked, the assets in the wallet can be stolen.
What is a cold wallet?
A cold wallet is a hardware wallet used to store a user’s crypto without needing to connect to the internet. Currently, cold wallets are being used to store large amounts of assets because of their security because hackers cannot attack cold wallets when not connected to the internet.
When a user wants to make a transaction, the cold wallet will generate a certificate code and sign the transaction with the private key. This happens on the cold wallet device and without the need to reveal private keys to online networks, minimizing the risk of attacks and loss of user assets.
Compare the Advantages and Disadvantages of 2 Types of Wallets
|
Criteria |
Hot WALLET |
Cold wallet |
|---|---|---|
|
Convenience level |
High |
Short |
|
Expenses |
Free of charge |
Cold wallet purchase fee |
|
Integration in DeFi |
Much |
Little |
|
Security level |
Medium |
High |
|
Amount of supporting assets
|
Much |
Little |
How to Choose a Wallet That Suits Your Needs
Trader
If you are a person who regularly trades in the market to seek profits in the market (trader), then a hot wallet is the most reasonable choice when:
- Hot wallets support many different asset types.
- Hot wallets are very easy to use and suitable for transactions that require high speed.
Degen
Degen is also known as people who deeply participate in the DeFi market to seek profit opportunities with “high risk and high reward”. Current DeFi projects, especially new projects that fit Degen’s criteria, hardly support cold wallets, so choosing hot wallets will be the most optimal.
Holder
Holders are people who buy and hold coins and tokens for a very long time (in years) because of their belief in their potential for price increase in the future. Therefore, the choice of cold wallet will be most reasonable when it can help their assets be safely preserved.
Keeping crypto assets in a cold wallet is also a way to hold it longer because of the difficulty of using it each time when the owner of the wallet wants to transfer coins or tokens to the exchange and sell it.
Popular Types of Hot Wallets
Metamask
Metamask is the most popular cypto storage hot wallet today, developed by a parent company called Consensys that has been around since 2014. Thanks to supporting Ethereum from the early days, Metamask is currently easily integrated. and general use of blockchain EVMs.
Currently Metamask is supporting all different operating system versions such as Windows, Android, IOS so anyone can use the wallet anywhere as long as they fully store the private key.
OKX Wallet
OKX Wallet is a web3 product built by the OKX exchange, currently ranked 2nd in the current crypto market in terms of stored assets. Thanks to direct integration into the OKX mobile app, OKX Wallet attracts many users to switch from CeFi to DeFi.
Popular Types of Cold Wallets
Ledger
Leadger is a cold wallet manufacturing company based in France that was launched in 2014 with the common advantage of wallets being produced with a compact size, easy to store and move.
In addition, Leadger’s products are popular with users thanks to being divided into many different segments from cheap to high-end with many different features but the security level does not change.
Trezor
Trezor is a cold wallet first launched in August 2014 by a company based in the Czech Republic called SatoshiLabs. Trezor wallet stands out by supporting many different types of assets in addition to major coins like BTC or ETH.
Summary
Above is the necessary information to understand what hot and cold wallets are as well as the appropriate users for each different type of wallet. Weakhand hopes that through this article, everyone will be able to find useful information for their research.
