“Hot and Cold Wallets: What’s the Difference?”


When partaking in crypto lending, your assets are more often than not kept in a cold wallet. This way, it cannot be traded and is secure until needed.


If you have spent any time in the crypto space, you will likely have heard about hot and cold wallets. On top of that, you may have noticed an ongoing debate in the community about which type of wallet is better. With many supporters and detractors making arguments for each one, it seems like this debate will continue for years to come.


With that said, what is the difference between the two? For that matter, why are cold wallets favoured in crypto lending?


Internet vs. No Internet


A ‘hot wallet’ refers to a cryptocurrency wallet that connects to the Internet. There are two types of hot wallets: online and desktop. Mobile wallets are also seen as digital, but due to their mobility, they could be deemed as “hybrid wallets.” Hot wallets are generally considered to be easier at setting up, accessing, and accepting than tokens are. However, hot wallets are also more susceptible to hackers, potential regulation, and other technical vulnerabilities.


Cold wallets/storage refers to cryptocurrency wallets that do not connect to the Internet. They are devices that are tailor-made for designated physical cryptocurrency storage. Generally speaking, cold storage is far more secure, but the downside is that they don’t accept as many cryptocurrencies as hot wallets typically do. Moreover, while hot wallets are free, cold wallets cost up to $80 in USD.


Why crypto lending prefers the cold


The general consensus is that, when it comes to cryptocurrency storage, cold wallets are the staple of security. This, above all else, is why it is perfect for crypto lending.


Hot wallets are vulnerable wallets, especially when you compare them to those of the cold variety. All digital wallets put your security keys and codes into storage within their online servers, which are vulnerable to hacks, scams, and other malicious activities. A majority of high-profile hot wallet offering sites and companies indeed have strong security measures. Still, all it would take to lose all of your savings is the smallest loophole.


Cold wallets, on the other hand, are known for being impenetrable. Your codes do not reside anywhere else except in that little device provides peace of mind for users. Not only that, but some of these devices place lots of importance on security. So much so that even if you plug them into a computer with a virus, your device will remain as safe and secure as it has always been.