Cryptocurrencies wallets are often categorized into hot and cold wallets. The significant difference between cold and hot wallets is that a hot wallet is connected to the internet. On the other hand, a cold wallet refers to a wallet without an internet connection.
Since the hot wallets are connected to the internet, there is a higher chance of them getting compromised or hacked by hackers if multi security layers and precautions are not implemented by the user.
Hot wallets are categorized into exchange wallets, desktop, and mobile-based wallets.
Exchange Wallets (Online Wallets)
Exchange wallets are also known as cloud-based or online wallets, are those offered by exchanges. Technically, any website that stores your crypto assets in the cloud can be viewed as an online wallet. While they are more convenient to access, online wallets store your private keys online and are controlled by a third party, making them more vulnerable to hacking attacks and theft. Most of the exchange services offer online wallets to their clients to keep their crypto assets.
These wallets are the easiest to use among all. To get one, all you have to do is to set up an account, which is free with any exchange services. Once it is created and approved, it can be accessed by any device or server in the world as long as there is a connection to the internet and the credentials are correct. These wallets are usually available on every platform, making them more flexible when it comes to exchanging and trading cryptos.
However, It’s important to take extra security precautions when using this type of wallet. Turning on two-factor authentication and implementing multi security layers is recommended by all online wallet providers.
It is also important to note that, because your funds are stored and protected by a specific exchange, once the security of the exchange is compromised, you could also lose all your crypto asset stored in their wallet. Although many exchanges claim that they keep a portion of their client’s crypto asset in a cold wallet and have high multi security implemented, it is recommended not to store a large amount of crypto in them and store the bare minimum that you need for exchange/trade purposes.
Below is a list of some of the well-known exchanges that offer online wallets to their clients.
You can store dozens of cryptocurrencies in the online wallets these exchanges offer and simultaneously trade, exchange, and use your crypto asset.
Desktop or mobile wallets are popular choices for a hot wallet. Desktop wallets are installed on a desktop computer and can only be accessible from that one device where it was downloaded. While it can be considered as a safer alternative than an online wallet, it can be quite inconvenient since you can only access the fund with the same device you downloaded the wallet.
Mobile wallets are a more convenient option because all you need to do is download an app into your phone. Then you can use the app to access the fund on your phone for sending, receiving, spending, and storing your crypto asset.
However, the real risk of desktop/mobile wallets is when your device gets lost or destroyed. In such a situation, you can easily lose your cryptos permanently. Besides that, these devices could also be exposed to virus attacks that allow hackers to access your details.
Below is the list of some of the well-known desktop/mobile wallets.
Crypto.com is a complete app-based crypto wallet that offers everything one needs with great flexibility for everyday spending of cryptocurrency. It is an excellent option for those who use crypto to pay for goods and services. Crypto.com offers Crypt-backed visa cards with up to 8% cashback rewards on all purchases of goods and services done with their cards. It leverages multi-sig security for the higher safety of the funds stored in the wallet. Besides that, Crypto.com also offers crypto-backed loans and staking for those interested in earning a steady income while holding their crypto assets.
Wirex is an app-based crypto wallet that offers great flexibility for those who also exchange and trade cryptocurrencies. The Wirex mobile crypto wallet is user-friendly and easy to use. Wirex offers crypto-backed visa cards with cashback incentives for those looking to spend their crypto assets in stores and anywhere that accepts Visa and Mastercard networks.
As mentioned cold wallets are those that are not connected to the internet and because of that they are by far the safest option to store crypto assets. However, they are considered inconvenient for those who actively trade, exchange, and spend their crypto asset.
One of the well-known types of cold wallets are hardware devices that store a user’s private keys in a device like a USB. Although hardware wallets make transactions online, they are stored offline which delivers increased security. They are compatible with several web interfaces and usually support more than one specific cryptocurrency. In order to conduct a transaction using hardware wallets, one has to connect the wallet to a computer or a device with the internet, via the USB port and enter the required credentials.
Hardware wallets come in a number of different forms, so it is important that adequate research is carried out before choosing one. They are great for storing large amounts of cryptocurrency, so long as you do not want to move it around often. There are mainly two well-known brands when it comes to hardware wallets that are very popular among crypto owners. These are Trezor and Ledger also known as ledger Nano.
The Ledger offers mainly three types of hardware wallets. Ledger Nano S, X,, and Ledger Blue. All three represent a Bitcoin, Ethereum, and altcoin hardware wallet consisting of robust security features, which can be used to store digital assets and make The cheapest is the Ledger Nano X, and the most expensive comes with a touch screen display,, is Ledger Blue. All three wallets support more than thousands of different cryptocurrencies. Some of the distinguishing features associated with these hardware wallets include ease of use, the ability to make payments quickly, a high level of security, and more.
Trezor was the first Bitcoin hardware wallet, offering secure cold storage plus the ability to spend with the convenience of a hot wallet. The Trezor wallet is a small, key-sized device that connects to your computer with a separate USB cable. Just like the Ledger, Trezor also supports Bitcoin and thousands of other cryptocurrencies. It stores the private keys offline and can be safely used on a malware-infected computer. Trezor wallets provide top-notch security for cryptos stored in them, by protecting them against both physical and virtual theft. It is an HD wallet where the user can control the private keys, and the entire wallet can be backed up with the 24 words generated on setup. Currently, Trezor offers two types of wallets, Trezor One and Trezor Model T. Both the Model T and the Trezor One connect via a USB cable to the computer. The Model T offers more features than the Trezor One, as it provides a touchscreen interface, as well as a MicroSD slot.