November 20, 2020 Hot and Cold Bitcoin Wallets

You will need storage for your Bitcoin and that’s where the Bitcoin wallet comes in. So what is this wallet and how does it work?

Bitcoin is one of the most popular cryptocurrencies in the world. More and more people are opting for trading with this currency. By doing so they make it much more accessible to the mainstream. Anyone can become a Bitcoin trader.

All you need to do is know the basics. In that regard, you have plenty of sites that offer articles on that topic. But knowing the theory is just the start, you’ll also need a bit of practice. That’s why developers have come up with simulator trading apps. They use real life prices and information so by using them you’ll get the practice you need.

What you also need is a storage for your Bitcoin. That’s where the Bitcoin wallet comes in. So what is this wallet and how does it work?

Bitcoin Wallets Explained

A Bitcoin wallet is no different than a regular wallet. It’s a place to hold your Bitcoin. However, there are several differences between a Bitcoin wallet and a regular one. The Bitcoin wallet has 2 keys: the private and public ones. The private one is your own and you don’t share it with anyone.

It lets you access your wallet. Also, you can approve the transactions you make with this key. The public key is the one you can share with other traders. With it, you can make transactions and receive money. Since everything is done online the wallets also provide security a layer of security.

However, there are different types of wallets. In general, they’re divided into 2 groups: hot and cold wallets. So, what’s the difference?

Hot Wallets

The term hot wallets is associated with the online Bitcoin wallets. They’re called hot because they’re connected to the Internet. This means that they’re pretty convenient but also risky to use. That’s because hackers are everywhere online and will try to get access to your wallet.

The most common ones are desktop and mobile wallets. The mobile ones keep the private keys on your smartphone. So whenever you want to make a purchase or trade face-to-face you can just get your phone out and go about your business.

They come in the shape of apps you can install on your phone. Naturally, different ones will have different features. Desktop wallets are also hot Bitcoin wallets. Your Bitcoin is stored on your hard drive if you’re using such a wallet.

When trading Bitcoin you can find all sorts of apps and websites that will help you out. Also, there’s more than one trading bot that will do the job for you. These bots require registration and a small deposit, to begin with. Naturally, you’ll have to tweak their settings before you let them trade.

Cold Wallets

The second group of wallets is called cold because they are not connected to the Internet. These are ideal for those who have a significant amount of Bitcoin to store. Physical wallets such as paper and hardware ones belong to this group.

Hardware wallets are hardware devices that have a certain amount of Bitcoin stored in them. These can be USB devices as well as other external devices. The private key is also on this device and nobody but the owner can access it. Some of them come with screens that let the owner go over the details of a transaction before verifying it. Hardware wallets are part of more than one top wallets list available online.

The paper Bitcoin wallet is also a cold one. It doesn’t store any Bitcoin but the private key is printed on the paper. This makes the owner practically immune to any hacker attacks. Of course, the owner has to go online if the owner wants to trade or make purchases.

Are Hot or Cold Wallets Better?

Hot ones are pretty popular. You can also get most of them for free. However, they are pretty vulnerable. If you’re looking for a good hot wallet then you’re going to go for a Bitcoin wallet that’s top-of-the-line. Yes, they’re convenient but when it comes to security, they don’t do a good job.

If you’re looking for a secure way to store your Bitcoin, then you should go with cold wallets. The private key is stored on a device or piece of paper that no hacker can get to. They’re not as convenient but they lower the risk of being hacked significantly. You’ll also have to pay to enjoy this benefit but it’s going to be worth your while.

It’s evident that cryptocurrencies like Bitcoin have a bright future. You are the one that decides what kind of wallet you use. Perhaps the future will bring a new type of wallet that’s both convenient and secure. Nevertheless, now you know the differences between hot and cold wallets and what to expect from them.

Subscribe to Industry Today