Hot wallets are easy to access, compatible with many coins and tokens, but potentially vulnerable to hackers. Cold wallets are safe, but users have to pay extra.

When joining the crypto space, users need a wallet to store it. Currently, there are two popular types of cryptocurrency wallets: hot wallets and cold wallets. Both have different advantages and disadvantages.

The main difference is that hot wallets are connected to the Internet, while cold wallets are not. Therefore, cold wallets are seen as a safer storage option for digital assets. However, users need to spend large sums of money to buy hardware.

Hot wallets are easy to use but have potential security risks

Hot Wallets are the most popular crypto wallets because they are easy to create and use. When users create an account on any exchange or download a wallet on a mobile or computer, these are all hot wallets.

According to CoinMarketCap , hot wallets are usually for investors who trade coins on a daily basis because they are easy to operate and are connected to the Internet. There are many types of hot wallets on the market, such as Trust Wallet, SafePal, Metamask and wallets integrated directly on the exchange.

Top exchanges usually store the majority of users' coins in cold wallets for added security. Web or mobile hot wallets usually don't have this feature.

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Hot wallets are used by many investors.

Mr. Nguyen The Vinh, CEO and co-founder of Coin98 Finance said that the advantage of hot wallets is that it is free, users do not need to pay any money to initialize.

“The hot wallet is completely free. At the same time, users can easily interact with digital assets when using hot wallets," said Vinh.

Because it is connected to the Internet, using a hot wallet is quite convenient. Users can directly connect with decentralized exchanges, DApps to participate in staking, swap tokens... At the same time, with a multichain (multi-chain) wallet, investors can store any coin or token on respective blockchains.

In contrast, the disadvantages of hot wallets often revolve around security. According to CoinMarketCap , storing cryptocurrencies on hot wallets carries the risk of being attacked by hackers and appropriating assets.

Recently, in cryptocurrency investment groups, there have been many cases of losing assets due to connecting wallets to fake pages of exchanges and projects to exchange coins. Fraudsters often create these pages to collect wallet security keys (passphrases).

Therefore, users need to carefully check the website and related information before making any transaction to avoid becoming a victim of a scam. In addition, investors need to secure the key in a safe place, preferably away from the Internet.

Cold wallets are safe but expensive

According to CoinMarketCap , cold wallets are considered a safe storage solution for cryptocurrencies because they are decoupled from the Internet. Users only connect the wallet to the network when they need to transact.

Paper wallets and hardware wallets are both classified as cold wallets. However, hardware wallets are more popular because they have separate software and come with customer support provided by the manufacturer.

A hardware wallet is a physical medium, shaped like a USB stick. To store cryptocurrencies in hardware wallets, users need to transfer assets from hot wallets to hardware wallets via the respective address.

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Hardware wallets are shaped like a USB. Photo: CryptoAst .

Conversely, when you want to send or transact, users need to connect the wallet to the Internet through specialized software and confirm the transaction with a private key.

Paper wallets work similarly to hardware wallets. However, this is just a piece of paper that contains the public wallet address and the private key. Therefore, when using this wallet, users need to keep it in a safe place to avoid theft.

Responding to Zing , Mr. Nguyen The Vinh said that the downside of cold wallets is limited support for tokens and high prices.

"Cold wallets are quite expensive and complicated to use. However, users do not have to interact directly with the wallet's security code, so it is safer," said Vinh.

There are many types of hardware wallets for sale on the market, with prices ranging from 1.6 to 4 million VND. Ledger Nano X, Trazor Model T, CoolWallet Pro, KeepKey are the best rated cold wallet models of 2021.

Due to the influence of the Covid -19 epidemic, Mr. Nguyen Minh Quan (Thu Duc City) had to close his net shop, remove the graphics card to dig coins, earn extra income waiting for the opening date.