Nowadays, the Internet and Blockchain technology offer tens of thousands of possibilities regarding cryptocurrencies and decentralized economies. However, there are also many associated risks due to the dangers of cyberspace and connections between platforms, software, and devices. In this context, and since cryptos have a high value in the current economy, the system of interchange of values is extremely vulnerable. This is why enterprises and platforms have created two wallet types to protect crypto transactions from robberies or scams: Hot and Cold Wallets. 

This brings up an important question: when it comes to Hot Wallets vs Cold Wallets, which one is better? In the following sections, we'll uncover the answer.

A cryptocurrency wallet works as an intermediary or interface between you and the platforms where you buy crypto or sell products related to cryptocurrencies or blockchain technology. This interface allows you to complete transactions and will record the process on the public blockchain ledger.

Every crypto wallet contains two relevant components regarding crypto transactions: the private and public keys. Like most keys on the web and blockchain, these keys are made of numbers and letters.

The private key corresponds to your personal password to complete the crypto transaction. The two wallets mentioned here integrate private keys as an excellent cryptographic string to access your funds.

Hot wallets, as its name suggests, are virtual purses you can actively use directly from a URL or by installing an application directly on your computer or mobile device.

A hot wallet saves the private keys to your cryptocurrencies when purchasing or mining them. In other words, when you need to complete a transaction, you’ll need the private keys that are stored in your wallets.

Hot crypto wallets are also known as software wallets since they are based on digital storage and Internet connections.

We can also say that these digital wallets are programs you install on the devices of your competence, laptop, desktop computer, or mobile phone. This way, you can approve transactions from any part of the world without having to get a physical device. 

Benefits of Using a Hot Crypto Wallet

A digital wallet offers unique advantages in comparison to a cold crypto wallet. It also has some drawbacks, but we’ll mention them in the next section. Now, let’s focus on the benefits. 

• A high level of convenience: It can provide ease of use and a well-designed interface. 

• Hot wallets are the right alternative for novices in the crypto world due to their simplicity and straightforward mechanism. 

• Most hot wallets are easier to download and configure than cold storage solutions.

• Hot wallets allow easy access through browser extensions and mobile apps and perform activities efficiently and on different devices.

• Crypto hot wallets are generally free to use, although some charge fees for the stored crypto.

Disadvantages of Hot Wallets

Hot wallets, since they are not based on hardware devices, entail some disadvantages worth considering when discussing hot wallets vs cold wallets. 

• They are commonly exposed to online risks like scams, cyber-attacks, and online piracy. Your hot wallet can be used as an attack vector to enter your crypto funds. 

• They are not recommended for important transactions or when you buy a huge amount of cryptocurrencies or crypto art, NFTs, etcetera. 

• If you do not have an Internet connection, then you won’t be able to access your account and complete your transactions through hot storage.

The Best Hot Wallets Available on the Internet

There are dozens of hot wallets you can easily access on the Internet. Most of them do not have a steep learning curve. Thus, you can easily use them as soon as you have them. We have selected the best four. 

Coinbase

Coinbase is a professional platform where you can manage your cryptocurrencies as you wish. It’s the easiest way to do quick and convenient transactions, use cryptos, and even earn cryptos. Among all the cryptocurrency wallets here, the Coinbase wallet has the easiest-to-understand interface, turning Coinbase into one of the best web wallets.  

Metamask

Metamask is one of the most well-received wallets you can currently find in the crypto universe. It’s ideal to control all your crypto assets and carry out transactions in most crypto platforms, NFT markets, and more. This software wallet is available as a browser extension and as a mobile application, which facilitates the usage of crypto keys. 

Exodus Wallet

Exodus is a major software wallet. Thanks to its service, you can store private keys and carry out Web3 and DeFi crypto transactions. With Exodus, you can control your means from everywhere, swap and transfer digital assets in a matter of seconds, and control your public and private keys easily and securely. Exodus supports over fifty networks, which means the reach of Exodus is incredibly significant in comparison to other desktop wallets and most cold wallets, which we describe below.

Trust Wallet

Trust Wallet is a seamless solution for holders and crypto enthusiasts who need to swap their crypto securely, protecting you against online attacks. Trust Wallet also provides good performance, allowing you to buy and sell crypto in three minutes or less. It also lets you earn crypto rewards and explore the NFT world to buy and sell your crypto art.

Cold storage wallets correspond to hardware wallets. It means they are cold storage devices that are not connected to the Internet and are separate hardware from the computer or mobile device.

Cold wallets come in the form of a USB stick or middle-size devices, like pen drives or external storage. Physical bitcoins, paper wallets, smart cards, and a secondary offline computer used to store cryptos are also cold storage wallet options.

These wallets differ from online wallets since they do not need a connection to work and hold a user’s private keys offline. This way, they offer an extra layer of security from hacks.

Benefits of Using a Cold Hardware Wallet

Cold wallets offer crucial advantages over their hot counterparts. In the first place, containing all the keys in a hardware device ensures no one can access them except you. Other benefits include the following:

• Since cold storage is stored offline, it offers more security because there are fewer possibilities to hack it, which means it is less vulnerable to loss of digital assets.

• With hardware wallets, you boast full possession of your tokens because private and public keys are in your control.

• They protect you against malicious smart contracts since they can’t be activated without your permission.

• Physical devices like these are portable, which means you can take them anywhere. Offline devices, due to their size, are easily portable.

Disadvantages of Using Cold Wallets as Your Cryptocurrency Storage

Regardless of the massive advantages of cold wallets, they still have some seatbacks you should consider before deciding what is the best choice for you.

• They are expensive. They can cost between $50 and $200.

• Although they are sold like “secure” devices, they also have some security breaches.

•  If you lose the device, you will have a big problem trying to access your funds.

Types of Cold Wallets

Offline software wallets bring a new level of security to the blockchain and cryptos, especially regarding long-term storage. Some common cold wallets are these:

• Paper wallet. It is a piece of paper containing public and private keys to access your cryptos and carry out transactions. Paper wallets can include a code bar to ensure even more security.

• Sound wallets. A sound wallet is a type of portable device that provides you with a sound key anytime you need to complete a crypto transaction. It’s a great storage method for storing huge amounts of crypto and assets. 

• Hardware wallet. It’s the most common type of cold wallet. It corresponds to a physical possession that is user-friendly and provides you with the keys you need to access your digital funds. 

The Best Cold Wallets on the Market

We have also selected four of the best cold wallets you can currently find on the market. All of them are good alternatives for your cryptocurrency exchanges.

Trezor Model One

Trezor is a successful and cheap cold storage wallet since its entry-level rises to $69, which is cheaper than its direct competitors. Besides, it offers the same level of security as its expensive counterparts. 

Trezor comes with a verification system that works through a PIN device whose private keys change all the time. The wallet supports over one thousand cryptocurrencies, including Bitcoin, Dogecoin, and Litecoin. We can say that Trezor is the best crypto wallet as a physical device.

Ledger Nano S Plus

Ledger Hardware Wallet is a popular cold wallet that offers several possibilities to store your cryptocurrencies. This crypto holder provides a high level of security that remains offline all the time, ensuring that your funds are isolated. You can obtain the basic S Plus model for $75, which is more than enough to save your digital currencies. Like the Trezor model T, you access your fund through a PIN device that does not need the Internet-enabled.  

CoolWallet Pro

CoolWallet Pro is a good cold wallet boasting a nice balance between security and convenience. Still, one important difference between this wallet and the other cold wallets mentioned above is that CoolWallet Pro is a native app connected to the physical device via Bluetooth. CoolWallet Pro includes proper security measures and facilities to send funds and engage with third parties in the Web 3.0 economy.

KeepKey

KeepKey is the next generation of security regarding cold wallets. It is competing directly with Trezor and Ledger. Like the other alternative wallets mentioned above, KeepKey also boasts a cheap option whose price rises to $79. One of the best aspects of KeepKey is that you can connect it to third-party applications like Aave and Uniswap. It offers thousands of opportunities related to a decentralized economy.

The most significant difference between cold and hot wallets is that the first works completely offline while the second works connected to the Internet. This way, cold crypto wallets are accessible only through a hardware or device. 

Cold wallets allow deep cold storage –a method that stores your private keys and makes them difficult to access. It has a deep disadvantage that when the device is missing, it can be a little hard to enter the recovery and backup options to access private and public keys. 

To leverage the best of both worlds, it is recommended to have a secondary phone acting as a cold wallet. The primary phone should be connected to the Internet, and the second only to check the key. Nothing more! This way, you avoid the greater risk of losing keys and assets.  

In other words, Internet-enabled devices will allow you to access your funds in case of emergency, and a cold wallet will provide you with the key without the need for mobile applications.

It is a tricky question since both types of wallets have their advantages and disadvantages and can be useful for different purposes or scenarios. Cryptocurrency transactions are not easy, and it’s a bad idea just to have a single device or wallet to protect your assets.

The best in this context is to have two wallets, a hot wallet and a cold wallet, and use them according to your immediate needs. Mobile software will give you instant access to your cryptos, and a cold wallet will provide you with the necessary security. Still, the option to use multi-signature wallets that will require you to approve access from several devices is interesting.