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What are Hot and Cold Crypto Wallets – Advantages and Disadvantages

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Security in the world of cryptocurrencies is one of the weakest points of all, and this is due to users being uninformed about the differences between the various wallets. Nevertheless, the cryptocurrency market is one of the most powerful markets in recent years. In this post, we will tell you what are the hot and cold crypto wallets and their pros and cons. 

Cryptocurrency wallets are tools that have recently been on the rise in the cryptocurrency market; being an option that provides security to the investor using these types of currencies; they are a safe way to store money as if it were a real wallet. 

Cryptocurrency wallets are divided into two types of wallets which are: 

Cold cryptocurrency wallet 

They are a type of wallet that operates through hardware which is generally an external device similar in size to a pendrive, in which the user can save and encrypt access to this device through keys.

Using this wallet will provide you with the following advantages: 

  • This type of wallet works outside of an Internet network, which will give you high security, as a lot of theft occurs on the Internet. 
  • It allows you to store up to 50 different types of cryptocurrencies. 
  • You need to set up a PIN or security code to use it. 
  • You can take your device everywhere. 

Using one of these wallets can generate the following disadvantages: 

  • You run the risk of losing your device. 
  • You cannot trade with these types of devices. 
  • You need to invest a significant amount of money to acquire it. 
  • Like any physical device, it is prone to failures, breakdowns or reading problems. 

Hot cryptocurrency wallet 

This is a type of software that allows cryptocurrencies to be stored virtually; that is, connected to an internet network. Although they are more insecure for storing coins in the cloud, their price is relatively lower than a cold wallet.  A number and password similar to a savings account or a virtual card is provided to manage the money. 

Using a wallet will provide you with the following advantages: 

  • By entering the wallet with the pin and access number you will have quick access to your stored coins. 
  • The investment cost to access a wallet is lower. 
  • It features a large portfolio of applications or software that function as a hot wallet. 
  • They allow you to connect to any platform so you can operate and trade. 

Using one of these wallets can generate the following disadvantages: 

  • Higher risk of theft as the money is stored in the cloud and is more prone to being attacked by cyber thieves. 
  • It has to be connected to the internet at all times, otherwise it cannot be operated, so it can be a big problem if your internet connection is faulty. 

Remember that if you trade a hot wallet it is better for you than a cold one, but we recommend that you encrypt it as best you can and choose the best software to give you more security, as hackers are on the increase; however, if you are a non-trading investor and want more security, cold wallets are the best choice. 

We hope that you have learned the difference between hot and cold wallets and their pros and cons. With this information we are confident that you will be able to choose the best option. 

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