Cryptocurrency hot wallets are a popular option for storing and using digital currencies such as bitcoin, etherium, and litecoin. Although these wallets are connected to the Internet, making them more convenient for frequent transactions, they also pose a higher risk of hacking. In this article, we’ll look at the advantages and disadvantages of hot wallets and give you some tips on choosing a safe wallet and protecting your cryptocurrency.
What are hot wallets or wallets
A hot wallet is software that connects to the Internet and allows users to send and receive cryptocurrencies. In general, hot wallets are divided into two types : software and web . Software wallets are downloaded and installed on the user’s computer, while web wallets are used through a web browser.
In this case, because it is connected to the Internet, it is considered a “hot” wallet, in contrast to “cold” wallets not connected to the Internet, with which they are considered more secure because they are less likely to be hacked. Thus, hot wallets are more convenient for frequent transactions, while cold wallets are better suited for long-term storage of cryptocurrency.
How hot wallets work
As we explained earlier, hot wallets are software that connects to the Internet and allows users to send and receive cryptocurrencies. Generally, hot wallets are more often used for frequent transactions because they are more convenient when it comes to giving users access, and cold wallets are better suited for storing cryptocurrencies that we will not touch for a while. In the case of hot wallets, they work by storing the private keys needed to access and transact with your cryptocurrencies.
As you already know, private keys are a unique sequence of letters and numbers that gives you access to your coins and that you must always protect because they are necessary to send the cryptocurrency to another person, since a hot wallet uses your private key to digitally sign the transaction and send it to the cryptocurrency network. Therefore, once you have requested, for example, to send a certain amount of cryptocurrency to another wallet , the hot wallet uses your public key to verify the transaction and shows it to you in your wallet.
How do private keys work? It is important to note that they do not physically store cryptocurrencies hot wallets, but simply provide access to them via private and public keys. That’s why it’s important to back up your private keys and keep them in a safe place , because without them you won’t be able to access your cryptocurrencies in case your hot wallet is lost or damaged. However, we insist that hot wallets are connected to the Internet, which means that they are more vulnerable to hacker attacks. Therefore, it is very important to choose a hot cryptocurrency wallet from a reliable company and follow proper security measures to protect your coins.
Advantages and disadvantages
Here are some advantages and disadvantages of hot wallets , so you can have a more objective idea about them.
Advantages of hot cryptocurrency wallets:
- Increased ease of use . Hot wallets are connected to the Internet and usually have a user-friendly interface, making them ideal for beginners.
- Increased Convenience . Being connected to the Internet, hot wallets allow you to make transactions quickly and from anywhere you have an Internet connection.
- Enhanced Accessibility . Many hot wallets are available online and can be used from any device with a web browser.
- Greater integration . Hot wallets are often integrated with exchange services and trading platforms, making it easy to buy and sell cryptocurrency.
Disadvantages of hot cryptocurrency wallets:
- Increased risk of hacking . Hot wallets connected to the Internet are more vulnerable to hacking attacks.
- Increased risk of loss . If you lose access to your hot wallet (for example, if you lose your password or your device is stolen), you could lose your cryptocurrencies forever.
- Less security . Hot wallets are not as secure as cold wallets because private keys are available online.
- Less control . By relying on a third-party company to store your private keys, you lose a degree of control over your cryptocurrency.
- Increased reliance on the Internet . Hot wallets can only be used when connected to the Internet, which can be inconvenient in some cases.
What are the best hot wallets on the market?
Here is a list of what, in our opinion, are the best hot wallets on the market:
- Mycelium is an open-source mobile wallet for Android and iOS that is very popular among cryptocurrency users because it is easy to use and offers a wide range of security features.
- Coinbase is a hot wallet and cryptocurrency exchange in one. It is extremely popular not only because it belongs to the very famous exchange Coinbase , but also because it is very easy to use, very secure, offers a wide range of cryptocurrencies and, as in the previous case, has a handy mobile app.
- Electrum is a hot desktop wallet for Windows, Mac and Linux which is very popular among advanced cryptocurrency users. It is easy to use and offers a wide range of security features. It also has a mobile app.
It is important to note that everyone has different needs and preferences when it comes to cryptocurrency wallets, so what is best for one person may not work for another. Therefore, it is important to do your own research and choose a wallet that fits your needs and preferences.
Hot wallets vs cold wallets, which one to choose?
While it is true that both options are valid, the reality is that the choice should always depend on how we are going to use it and the needs of each, since not all invoices have the same features or offer the same functions. That said, here is a comparison between the two so you can see exactly the characteristics of both:
- Accessibility. Hot wallets are connected to the Internet, which means you can access them anytime, anywhere through an Internet-connected device. Cold wallets, on the other hand, are not connected to the Internet and require you to connect a physical storage device (such as a flash drive or external hard drive) to your computer to access them.
- Security. Cold wallets tend to be more secure than hot wallets because they are not connected to the Internet. This means they are less susceptible to cyberattacks and identity theft. Hot wallets, on the other hand, are more vulnerable to these types of attacks because they are connected to the Internet.
- Convenience. Hot wallets are more convenient than cold wallets because you can access them anytime, anywhere through an Internet-connected device. Cold wallets are less convenient because you need a physical storage device to access them.
- Cost. Cold wallets tend to be more expensive than hot wallets because they require an additional physical storage device. However, this also means that cold wallets tend to be more secure and better protect your coins.
In general, it is recommended that you use both wallets to get the best out of both: security for cold wallets and convenience for hot wallets. You can use the cold wallet to safely store most of your coins and use the hot wallet to access them when needed.
Material Bitcoin and Material Ether
As we mentioned earlier, there are several different types of wallets: software wallets ( online ) or hardware wallets ( offline ). However, the security issue goes beyond just key management; it’s also about how coins are stored. So we present you the best way to store your cryptocurrencies: using a Material Bitcoin wallet, the safest wallet in the world, designed to protect against fires, floods, shocks or hacker attacks .