Cold Wallet Vs. Hot Wallet: What’s The Difference?

You may have heard about cold and hot digital wallets but do you know how they are different from each other?

The simplest way to describe the difference between a cold wallet and a hot one is this: hot wallets are connected to the internet while cold wallets are not. Most people who hold digital assets have both cold and hot wallets because they are designed for different purposes.

Hot wallets are like checking accounts while cold wallets are similar to savings accounts.

People who have digital assets keep a small amount of money in their hot wallets for purchasing stuff. They keep the vast majority of their digital coins in their cold wallet.

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SECURITY

Q: Why do people keep most of their digital coins in a cold wallet?

A: Hackers cannot steal digital assets that are not connected to the internet.

Q: So then, how safe are hot wallets?

A: The security of hot wallets is dependent upon the security habits of individuals and third parties. They are vulnerable to theft because they are constantly connected to the internet. As long as something is connected to the internet, it is vulnerable to attack. But keeping very small amounts of digital currency in hot wallets is fine because a hacker probably won’t waste resources trying to gain access to small amounts of money.

HOT WALLETS

ACCOUNTS

Accounts within digital asset exchanges like Poloniex and Bittrex are considered hot wallets because these companies hold your funds in their…