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Cold vs Hard Wallets: Which bitcoin wallet is best?

2021-03-29

The crypto wallet lets people send, receive, and store cryptocurrency. Essentially, it is a digital bank account for cryptocurrency.

To be specific, the software known as crypto wallets store private and public keys so you can interact with different blockchain networks and manage your holdings in digital currency.

Crypto wallets come in two categories: cold wallets and hot wallets.

These two categories can eventually get categorized into the following:

Cold Wallets

  • Hardware wallets, like Trezor and SafePal;

  • Paper wallets.

Hot Wallets

  • Desktop wallets, such as Electrum and Armory; 

  • Mobile wallets, like Edge and Trust Wallet;

  • Hybrid wallets, such as BTCPay and Blockchain.

Mobile, hybrid, and desktop wallets are known as hot wallets while paper and hardware wallets are cold wallets.

As non-custodial wallets, cold wallets are those wherein the owner is the only one that has the private keys that gives access to the wallet's funds. Hot wallets, on the other hand, may either be custodial or non-custodial. The private keys are held in custodial wallets in behalf of the owner of the wallet. Because of that, they provide less security especially if the users have to believe the wallet provider.

When it comes to cold and hot wallets, their main difference is that hot wallets connect to the internet, while cold wallets don't. Because of this, when it come sto digital assets, cold wallets can provide a storage option that is more secure.

Let's now check out the details of these two kinds of wallets.

Cold Wallets

Considered as a highly secure storage for cryptocurrency, cold wallets are not connected to the internet. It only links to the internet whenever you need to undergo a transaction.

Two of the options in cold wallet are paper wallets and hardware wallets. Hardware wallets are highly popular because the manufacturer provides customer support and they can be quite easy to use.

Hardware wallets come in a physical medium which typically comes in a USB stick where you can store the private keys of the wallet. Because of this, they are unreachable by malicious parties like hackers.

Have your crypto stored in your hardware wallet by sending it from your hot wallet to the public address of your hardware wallet. In case you want to use your hardware wallet to send crypto to an exchange address or colleague, you will use the internet to connect to your hardware wallet through the dedicated software of your wallet. After that, you can have the transaction signed with a private key.

Hardware wallets have a similar function with paper wallets but instead of having a physical device like a USB, paper wallets are paper that have a private key and a public wallet address. Because of that, the cryptocurrency may need to get stored in a secure and safe place where people won't easily find them to avoid getting stolen. 

Send coins from your paper wallet by importing the wallet into a hot wallet through the scan of the private keys as this will let the coins get spent.

Since cold wallets give a great solution in storage when it comes to security, they may become disadvantageous as these can be impractical for daily use. Sending crypto from a cold wallet can be cumbersome.

Hot Wallets

Here are wallets that are highly common as it can be easy to have them set up and used.

Everytime you download a desktop wallet, make an account on an exchange, or download a mobile wallet, you create a hot wallet.

Hot wallets are great for people who use cryptocurrency everyday.

Whenever you spend crypto or trade crypto regularly, it would be best to have your digital currency stored in a hot wallet.

Since hot wallets connect to the internet, it can be seamless to make crypto transactions as just a few clicks are needed on your computer or phone.

Typically, hot wallets are exchange wallets. Yet, there are some leading exchanges that choose to store most of their users' funds in cold storage as this improves fund security. This feature is not offered by mobile or web-based wallets.

Even if hot wallets appear great because they are easy to use, their lack of security is a major drawback.

Having a significant mount of digital assets stored in a hot wallet like a mobile or web wallet isn't advisable as it could allow your funds to become exposed to security threats like cyber theft.

Because of that, it would be best to put long-term investments in cold wallets and just store small amounts of crypto in your hot wallet.

Know how cold and hot wallets differ including the security that they provide for your crypto-assets so you'll know what kind of wallet would be best for you.

Selecting a Wallet

Whenever you want to choose which crypto wallet is best for you, everything is up to you. You can choose to purchase and "HODL" Bitcoin but it would be best to place that digital currency in cold storage like a cold wallet.

In case you regularly spend crypto, it would be best to have some of your crypto held in a mobile wallet.

Whatever wallet you select, just make sure that the wallet is non-custodial and that only you hold the private keys. This will allow you to have a complete control over all of your funds the whole time.

Get to Know How to Secure Your Cryptocurrency with Binance 

The prominent cryptocurrency exchange in terms of users and trading volume is Binance. It announced a P2P (peer-to-peer) trading platform in PHP or Philippine Peso. The company aims to provide Filipinos access to cryptocurrency in their local currency.

It can now be possible for Filipino Binance users to sell and buy ETH, BTC, BNB, USDT, EOS, and BUSD using the Philippine Peso. Binance has a P2P platform that allows Filipinos to do this without any transaction fees. Having this integrated will enable the user to trade crypto in their preferred prices and payment modes. They can even have their crypto assets transferred to a Binance wallet without an added cost. 

Because of the platform’s zero transaction fees, it offers an escrow service. It aims to ensure that all of the cryptos will go to the users’ wallets. Binance has a P2P platform that lets users gain more access to various financial services. Included here are spot, margin, lending, and futures trading of Binance.com.

Since its launch in October 2019, Binance’s P2P platform has supported approximately 31 fiat currencies. It was also able to process trades of more than $1 billion. For their Global P2P Merchants Program, the company now actively searches for local merchants with reliable crypto and fiat access. Here, verified merchants enjoy a lot of benefits. It includes exclusive support for customers, VIP discounts, ad transactions and postings, and security deposits without any fees.

Start learning about Binance P2P trading by downloading the Binance mobile app now.