Is a Hot wallet something you need to know about?

2 min read

Learn the difference between hot and cold wallets.

What are Hot and Cold Wallets all about?

Everybody wants their money to be safe and secure. The cryptocurrencies we purchase, such as Bitcoin, Ethereum, Dogecoin, etc., also need to be kept safe. Wallets are used for physical currencies to prevent them from being stolen, falling, etc. In the case of cryptocurrencies, a digital form of currency, we need an electronic or online wallet to keep the coins safe. Bitcoin revolution is the solution.

The wallet is a digital space where cryptocurrencies are stored. It stores the coins in the forms of their encryptions, i.e., in terms of 0s and 1s. It can only be accessed by the owner with the privacy code or a person with whom the owner has shared the passcode. Every wallet has its digital code, i.e., an electronic address, which helps the user to easily receive or send their cryptocurrencies. Based on the wallets being online or offline, they have been categorized into hot and cold wallets.

Hot wallets: Advantages and Disadvantages

Crypto wallets are based on different platforms like web, mobile, desktop, paper, hardware, etc. the wallets which are based online, i.e., on the web, mobile, or desktop, are categorized as hot wallets. Thus, hot wallets are those wallets that are based on the internet and can be easily accessed. For regular trading of Cryptocurrencies, hot wallets are the best. It is mostly used by those who frequently access their wallets for purchasing, sharing, or selling their coins.

Hot wallets’ greatest selling point is its user-friendly design. What one requires to access their wallets are their device and an internet connection. Any device with an internet connection can access web wallets. It makes trading and money withdrawal from wallets simple.

However, it also comes with its disadvantages. Hot wallets, being online, brings with them the additional risk of cyber-attacks. These wallets are prone to cyber theft. Hence keeping a lot of money in hot wallets is not advised. Web wallets are the most vulnerable, as they can be accessed from anywhere in the world. Thus, the alternative of a cold wallet comes into play.

Cold wallets: Advantages and Disadvantages

For Ethereum, dogecoin, or bitcoin prousers, who invest huge sums in cryptocurrencies, using cold wallets is prescribed. Cold wallets are the paper and hardware forms of crypto wallets. These wallets are generally used to keep the greater sum of cryptocurrencies which are kept as long-term investments secured.

The internet is not accessible through cold wallets. The cryptos are stored in this form on a computer or other non-always-connected device, such as a pen drive, etc. This is a more secure form, as no one can access its codes until it’s connected to a device that is further plugged into the internet. Thus, people who purchase cryptocurrencies with a mindset of investing their savings for the future and not generating a short-term benefit use these forms of wallets.

However, in times of emergency, if one wishes to get their money out of the wallet, the process becomes lengthier. To get the money out, the hardware device first needs to be connected to a device with the internet. Then, the amount required for the transaction is transferred to the hot wallet before it can be accessed. Thus, cold wallets are secure but time-consuming and are not suitable for short-term money-makers.


Wallets are an important component in the business of crypto trading. With the variety of wallets available in the market, sometimes it gets confusing for the users for which one to use. So, with the details of hot and cold wallets and the various advantages and disadvantages they come with, people can select the best form as per their suitability.

Hot wallets are usually easily available and are free of cost. Anyone can choose which one they long for. Cold wallets are safer since the involvement of an internet connection is not there. Both have their pros and cons, as discussed above.

People are drawn to cryptocurrency wallets because they provide them a feeling of freedom. They get the impression that nobody can access their funds and that they are not subject to any regulating body’s control to keep their accounts in order.

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