Over the past couple of years, cryptocurrencies have established themselves as a reliable and alternate mode of transaction.
The benefits of cryptocurrencies range from anti-forgery, low fees and instant redemption. However, this medium is not insulated from controversy. In the recent past, there were a handful of incidents which exposed the vulnerabilities in this system. The most famous example is that of Mt. Gox, where over 850,000 bitcoins were stolen or reported missing. But don’t let this discourage you from investing in this emerging field.
Usually, cryptocurrencies are stored and transacted using digital wallets. Hence, it is essential for one to know of the different types of cryptocurrency wallets available and their uses. For starters, these wallets are broadly divided into two categories - Hot Wallets and Cold Wallets. Hot Wallets are those cryptocurrency wallets that are connected to the Internet. Similarly, Cold Wallets are those which are offline in nature.
These two wallets bring in their own set of strengths and weaknesses to the table. Hot Wallets allow easy transactions, are easily accessible on different platforms and often a single wallet supports multiple cryptocurrencies. On the downside, Hot Wallets are very susceptible to hacks. Hot Wallets are further divided into Online Wallets, Mobile Wallets and Desktop Wallets. Popular examples of Hot Wallets include Coinbase, Electrum and Mycelium.
Meanwhile, Cold Wallets are comparatively more secure than their Hot siblings. This advantage stems from their “offline” nature, but ironically this is also its biggest disadvantage. Cold Wallets are very difficult to use in transactions and given its offline as well as physical nature, it becomes easier to misplace these types of wallets. Cold Wallets are usually divided into Hardware Wallets and Paper Wallets, but some Desktop Wallets also fall into this category. Some popular Cold Wallets includes Trezor, Nano Ledger S and MyEtherWallet.
By understanding the nuances between Hot and Cold Wallets, it becomes easier to know where to store your cryptocurrency. For instance, if you are a trader, it makes sense to invest in a Hot Wallet given its dynamic nature. However, if you are investing in cryptocurrencies for a long-term, Cold Wallets are the best option since they are very secure. Apart from the above available options, you can start your own cryptocurrency wallet service. Blockchain App Factory can help you develop a secure and reliable wallet while also providing solutions to other cryptocurrency and blockchain queries.