A hot crypto wallet and a cold wallet, what is the difference between them and how are they used?

There are 2 types of crypto wallets - a cold wallet and a hot wallet, but what does that actually mean? The following article will sort out the mess and explain in depth what exactly each of them is

Share the article

A crypto wallet allows you to send, receive and store digital currencies.

The wallet serves as an intermediary for the Blockchain network of various digital currencies.

Each crypto wallet has a public key and a private key which constitute the operational and security mechanism of the wallet.

The public address should be treated like an email address or bank account number.

The private key should be treated as the login information for the user that no one should know except you.

Anyone can send emails to the address, but the only one who can read the information, use it and forward it is the one who holds the private key.

A cold wallet is a type of cryptographic wallet that is not connected to the internet. These wallets are considered more secure as they are less vulnerable to hacking and online threats on the internet. Cold wallets can be physical devices, such as a hardware wallet, or they can be a piece of paper with a private key printed on it.

To create a cold wallet, you will need to follow these steps:

  1. Choose a hardware wallet – There are several options of hardware wallets available in the market, with Trezor and Ledger being the biggest and most well-known in the market. These devices are specifically designed to store cryptocurrency offline and provide an additional layer of security.
  2. Set up the wallet – Follow the manufacturer’s instructions to set up your hardware wallet. This usually involves creating a PIN which is a 4-8-digit password. and a key, which is a series of 12 or 24 words that you can use to recover your wallet if it’s lost or stolen.
  3. Transfer your cryptocurrencies – Once you have set up your hardware wallet, you can transfer your cryptocurrencies to it.

Click here to watch an illustrative video for creating a Ledger Nano S cold crypto wallet from Ledger’s official website.

Unlike the cold wallet, a hot wallet is a cryptographic wallet that is connected to the Internet. These wallets are easier to use and easier to access, but they are also more vulnerable to hacking and online threats across the internet. Hot wallets can be configured as an extension to the web browser or as an application on the mobile phone.

To create a hot wallet, you will need to follow these steps:

  1. Choose a hot wallet type – There are several types of hot wallets available like Trustwallet or Metamask.
  2. Download or Sign Up – If you are using Hot Wallet as a web extension you will need to download the extension and if it is on mobile you will need to download the wallet app and install it on your mobile phone. Similar to the cold wallet, follow the instructions here as well until you receive a key (12 or 24 words) which is actually the private key to your wallet.
  3. Transfer your cryptocurrencies – Once you have set up your hot wallet, you can transfer your cryptocurrencies to it from anywhere with the click of a button.

To use your cold wallet, you will need to follow these steps:

  1. Download the wallet software you have from the company’s official website, for example Ledger.
  2. Connect the hardware wallet to the computer – if you are using a hardware wallet, you will need to connect it to the computer using the included cable or using a Bluetooth connection if it supports (less recommended for security reasons).
  3. Unlock your wallet – Follow the instructions on your hardware wallet to unlock it. You’ll usually need to enter your recovery key if it’s a new wallet or use the PIN code you chose when you activated the wallet if it’s a used wallet.
  4. Send or Receive Cryptocurrencies – Once your wallet is unlocked, you can use it to manage the funds in the wallet.

To use your hot wallet, you will need to follow these steps:

  1. Open your Hot Wallet software – If you are using Hot Wallet as an app, open the app on your device. If you are using a browser extension, then open your browser and enter the password or the key there if necessary.
  2. Send or Receive Cryptocurrencies – Once you are connected, you can use your hot wallet and send funds.

Please note that in order to receive coins it is not necessary to connect to the wallet but only to provide the public address to the person who needs to send you the money.

Always remember to always keep your private keys secure, whether you use a cold wallet or a hot wallet. Your private keys are the keys to your cryptocurrencies, and if they are lost or stolen, you may lose access to your funds and no one can help you recover the key.

אלי טונקל

More articles

What are stable coins and what to choose USDT or USDC?

USDT and USDC are two types of stable coins, which are cryptocurrencies pegged to the value of a specific asset, in this case the US dollar.

Read More

How much money should you come with, at the beginning, to start investing in the crypto world?

When it comes to investing in cryptocurrencies, the question of how much money to start with is a common question. After all, the crypto market is known for its volatility, and it's natural to want to be cautious when entering into this type of investment.

Read More

What is the difference between the types of trading and what character is suitable for each of them?

Day trading, swing trading and long-term investing are three popular types of trading that are commonly used in the cryptocurrency market. Each of them has its own set of characteristics and is suitable for different types of investors and different market conditions, of course an experienced investor can also combine them all.

Read More

Pages

Info

Designed and developed by

Facebook Instagram Youtube
error: לא ניתן להעתיק תוכן