How to Find the Best Crypto Wallet for You: Hot or Cold Storage
Once you have learned how to start crypto trading or have been positive about investing in cryptocurrency, then you have to decide which altcoin or bitcoin wallet is best for you.
Crypto wallets can fall into two categories according to the way that they operate - hot storage or cold storage.
Hot Crypto Wallets
Hot crypto wallets are connected to the internet. Most of these hot wallets are in the form of software and applications. They are easier to set up, convenient for daily use, simple to access, and generally more efficient to accept tokens.
Although there are advantages in using hot crypto wallets, there are also disadvantages to choosing them. Since hot wallets are connected to the internet, they can be prone to hacking and be vulnerable to technical problems.
Cold Crypto Wallets
Cold storage for bitcoin and altcoins are essentially not connected to the internet. Instead of relying on an internet connection, cold wallets use a physical medium to store crypto keys offline. Because of this, it is considered as resistant to online hacking and is ultimately secure.
Although there are considerable advantages to use crypto wallets, there are also cons associated with it. The first is its relative price compared with hot wallets. Cold storage devices can be costly for some people. They are also not convenient for daily transactions or for regular trading.
With both advantages and disadvantages in both hot and cold crypto wallets, how do you choose which is best for you? What should you take into consideration in the process of decision-making?
Security, Convenience & Accessibility
For most crypto traders, the first and foremost in their list of categories for choosing the best crypto wallet is security. Since the very purpose of wallets is to keep your digital assets protected and secure, then your choice of crypto wallet should have the best safety features.
However, there are also debates as to which type of crypto wallet is the safest.
For CoinTelegraph, crypto investors must “avoid using any kind of wallet that requires an internet connection,” and instead pushes for cold storage options.
However, Changpeng Zhao, CEO of Binance, argues otherwise. According to him, “Good cryptocurrency exchanges invest heavily in security infrastructure that a normal person would not be able to match or even imagine. He even points out that the majority of crypto investors today who are entrusting their assets on centralized custodian services just like the Binance crypto exchange wallet have much more security than holding the crypto-assets themselves.
This response by CZ Binance came after Peter Schiff, an American economist, and financial broker, complained about losing all the Bitcoin he ever owned just because his wallet got corrupted and his password no longer valid. This is a common problem among those who use cold wallets that are not properly backed up. According to a 2018 study by the Wall Street Journal, 20% of all Bitcoin was forever missing and can no longer be retrieved because owners of the coin have completely lost access to their private keys for various reasons.
Another factor that you can take into account when choosing the best crypto wallet is convenience and accessibility. Do you need to access your coins frequently to send funds or purchase something? Have you registered in a crypto exchange platform and need to trade on a regular basis?
Know that in choosing the best cryptocurrency wallet for you, there has to be a trade-off. Cold storage options that are essentially not connected to the internet can be less prone to hacking. However, the process of transferring coins to and from a cold wallet can be quite burdensome compared with the process of fund transfer to and from a hot wallet.
That’s why some investors who have a significant amount of cryptocurrency assets are using both hot wallets and cold wallets. They only put the funds needed for daily transactions and crypto trading activities in their hot wallets while keeping the remaining coins for “HODLing” or long-term investment in their cold wallets.
In the next article, we will be discussing the types of cryptocurrency wallets, including software wallets, mobile wallets, exchange wallets, hardware wallets, and paper wallets.
In the meantime, you can check out the altrady crypto trading software and discover an easy and convenient way for trading bitcoin and altcoins.