Hardware Wallet vs. Hot Wallet, Which Should You Choose?

Jump to page contents

Hardware Wallet vs. Hot Wallet, Which Should You Choose?

Wallets play a very important role within the cryptocurrency industry, but cold wallets and hot wallets play this role considerably differently. Either type of wallet has its own attributes and limitations which make it an indispensable tool for traders and investors, but these same attributes also make it vulnerable to different threats.

Commonalities between Wallets

As with all cryptocurrency wallets, both hot and cold storage solutions are, in essence, software programs which store private and public keys. Both kinds are normally able to connect to specific or generic blockchains and allow users to seamlessly transfer digital coins whilst also monitoring the balance within the wallet.

Normally, wallets accept multiple currencies at a time, with Bitcoin, Ethereum, Ripple, and Litecoin accepted by the majority. Smaller, lesser-known currencies, such as DASH, are accepted by fewer wallets.

Hardware Wallets

The main purpose behind the existence of hardware wallets is security. Disconnected from any exchange platform, they are virtually unhackable, offering the user superb peace of mind. There is a lot to learn about hardware wallets, but suffice to say that whilst the majority of such wallets, including Ledger Nano S and KeepKey, come at a cost, it is well worth it.

Hot Wallets

Hot wallets come in many forms and include mobile, desktop, and web variations. Essentially, what makes a wallet hot is the fact that it is constantly connected to the blockchain or exchange, and funds can be transferred instantly in or out. This provides users with a level of convenience far beyond that of any hardware wallet, but it also comes with higher risks.

Many vital services, including bank accounts, are today available online. Therefore, at first glance, the notion that a hot wallet is considered especially vulnerable might appear counter-intuitive.

What you need to remember is that banks and other online providers invest heavily in securing their network from unauthorised access. Hot wallet providers are normally unable to match this investment because in most cases they are offering the wallet for free.

This is why users should always opt for more reputable hot wallets, such as Coinbase Wallet. Part of a larger group which includes Coinbase and Coinbase Pro, Coinbase Wallet enjoys the security investment made by its mother company into all of its subsidiaries, at no cost to the user.

When Best to Use Which

Given the functionalities and vulnerabilities of both types of wallets, there are specific situations where you would be better off using either one or the other.

If you have invested a considerable sum in Bitcoin or other cryptocurrencies, and plan to hodl for a while, then you should store these funds in a hardware wallet.

On the other hand, if you plan to trade or speculate on a short-term basis, then you should keep your currency in a hot wallet.

Ready to join our tribe?

We respect your email privacy

Subscribe now to recieve exclusive updates and offers!

Recently Similar Guides

Latest Guides

Crypto Mining,Mining

CPU vs GPU Mining at Home: Which is Better?

As cryptocurrency becomes mainstream, more and more people are getting involved in the crypto-world. This has also raised curiosity on how to mine cryptocurrencies and not just exchange and purchase them. As exciting as this sounds, crypto-mining is not easy to achieve, as it requires deep technical knowledge. If mining cryptos is something you are […]

15 June, 2021
Crypto Wallets,DogeCoin,Ethereum,Litecoin,Ripple

Best Ways for Coin Storage to Protect Your Cryptocurrency

As the price of Bitcoin and other cryptocurrencies continues to soar, news of people who have lost access to their crypto stash is always hitting the headlines. Recently, Stefan Thomas, a German-born crypto enthusiast, made news when he had only two attempts to his password for him to access his 7,002 Bitcoins worth millions of […]

9 June, 2021
Crypto Mining,Mining,Monero

How To Mine Monero (XMR) In 2021

In this how to mine Monero guide, we will provide you with the important information you need to know before you mine this cryptocurrency. We will also offer guidance on building your Monero mining rig and where you can sell your coins for a profit. What is Monero? Monero is an open-source digital currency that […]

6 June, 2021
Bitcoin,Crypto Mining,Crypto Wallets,Litecoin

How to Mine Litecoin in 2021?

Although Bitcoin is seen as the “gold” of cryptocurrencies and a value for long-term purposes, Litecoin is seen as the “silver” of cryptocurrencies and a trading tool for cheaper and daily purposes. Litecoin was released on October 7, 2011, through an open-source client on GitHub. The Litecoin network was launched on October 13, 2011. It […]

2 June, 2021
Altcoins,Cryptocurrency,Exchange Platforms,Investment

Open Source Cryptocurrency Exchange Explained

Cryptocurrencies are turning the Fintech world upside down. As the immense power of Blockchain technology continues to unfold, it comes with limitless opportunities that are transforming the global economy. Apart from the decentralized nature of crypto, there’s one fundamental aspect of this mind-boggling technology: the open source aspect of cryptocurrencies. To understand how crypto works, […]

19 May, 2021
Cryptocurrency,Investment,Liquidation

Cryptocurrency Liquidity And The Importance Of It

The worldwide recognition of cryptocurrency has drawn people’s attention to certain terms like market capitalization, staking, harvesting, NFT, liquidity, and many more. Cryptocurrency traders know that they have no other option than to learn these terms if they want to succeed in the crypto market. This is because such terms make it easier for them […]

17 May, 2021
Bitcoin,Bitcoin Cash,Litecoin

Litecoin vs Bitcoin Cash – Which is better?

Bitcoin is considered one of the biggest innovations of the recent past. However, the rapid development also brought problems that were not expected so soon. Scalability, in particular, has become a challenge. In response, a hard fork of Bitcoin eventually created Litecoin and Bitcoin Cash. Litecoin (LTC) was launched in 2011, making it one of […]

14 May, 2021
simulated trading,Trading,virtual trading

How To Automate Bitcoin Trading?

Bitcoin is the most accepted, traded, and valuable cryptocurrency. It has come a long way since its launch in 2009 and virtually all crypto exchanges offer bitcoin on their platform. If you’re looking to trade bitcoin, you should consider using crypto trading bots. This article will touch on what trading bots are and will provide […]

11 May, 2021