Cryptocurrency transactions are impossible without a special wallet. Whether you plan to use bitcoin, litecoin or any other electronic currency, you first need to create a cold or hot cryptocurrency wallet. Today we will talk about hot and cold wallets, it will be very interesting.
What is the difference between a hot wallet and a cold one?
If you are just planning to get into cryptocurrency, one of the most important issues that need to be addressed is the safe storage of electronic funds. To do this, you will need a crypto wallet, which can be hot or cold. Investors often use both types of wallets for cryptocurrency transactions.
Hot Wallet is a hot cryptocurrency wallet that has a permanent internet connection. They are mobile, desktop or can work directly from the browser. They allow you to instantly buy or sell coins and tokens without the need for additional settings.
Cold Storage is a cold wallet that does not have a permanent internet connection. Connection to the network is carried out only for a few seconds at the time of the direct transaction. It involves storing the currency offline under the protection of a reliable personal key.
Features of cryptocurrency wallets
Cold and hot crypto wallets have their own advantages and disadvantages, as well as different use cases. We have prepared for you a basic list of their features. This will allow you to make an informed decision about which cryptocurrency wallet to create – hot and cold. If you use cryptocurrency for different purposes, you may need both options at once.
Pros of cold wallets:
the ability to create backups;
maximum level of protection against hacking;
suitable for storing large amounts.
Pros of hot wallets:
support a large number of cryptocurrencies;
ideal for beginner miners who do not have large amounts.
The main disadvantage of a hot wallet is that it does not have as high a level of protection as a cold one. Therefore, a hot wallet is used for fast transactions with small amounts of cryptocurrency.
Cold is chosen by investors for storing large amounts. Cold Storage is more often presented in hardware form (a hard drive for a computer or a separate device that stores all the information). It is difficult to carry out transactions quickly, taking into account the peculiarities of use, so the option is ideal for long-term secure storage of cryptocurrency.
How to Create a Hot Cryptocurrency Wallet
Hot Wallet is any online service that offers cryptocurrency storage services. You can create a hot wallet both on the exchange and on a specialized service that provides only a wallet.
The most convenient option is a crypto exchange, which provides the entire necessary set of tools for everyday operations with cryptocurrencies. Therefore, to begin with, let’s figure out how to create a hot wallet on one of the popular exchanges, for example, Binance.
Visit the official Binance website and click the “Register” button.
Fill out the form with the email address, password, and user ID of the person who invited you (optional).
Activate the captcha and confirm the registration by clicking on the link sent to your email.
Sign in to your account.
In the “Wallet” section on the main page, select “Deposit”.
In the drop-down list, you must select a currency, for example, Bitcoin.
This completes the process of creating a Bitcoin hot wallet. A wallet address will appear in the upper right corner, which can be used for transactions.
Another option is specialized wallet sites. No software needs to be downloaded. All actions take place online. Consider the registration process using BitGo as an example:
On the official website, click the Sign Up button.
Enter the personal data requested by the system, and choose a strong password.
An activation link will be sent to your email, which you need to follow.
Choose the appropriate security method: Fido U2F, Yubikey, Google Authenticator.
Upon completion of the process, you will receive a unique e-wallet address for transactions.
Each time you log in, you must confirm your account by entering a code from SMS or a personal key.
Wallet as an application is another option available, which involves downloading the application from the developer’s website. The most popular services include Exoduce, Jaxx, Blockchain. These are multi-currency services that can be used as an application for mobile and PC. You can access wallets if necessary through the website. Seed phrases are used to restore access. The system allows you to make a backup.
How to Create a Cold Cryptocurrency Wallet
Experts consider hardware wallets to be the most secure way to store cryptocurrency. There has not been a single case of theft of funds from such a wallet. The program and keys are contained on an electronic device that is connected to the computer only at the time of use. If you lose your device, you can access the funds by purchasing the same device, provided that you remember the password and passphrase. Otherwise, it is almost impossible to restore access.
KeepKey, Trezor, Ledger Nano S are the most popular hardware wallets that work with any operating system (Windows, Linux, MacOS). Supports several types of cryptocurrencies. They work with the most popular online, desktop and mobile wallets. The cost of devices varies between 100-400 dollars.
The process of working with a hardware wallet is as follows:
The device is connected to the computer.
The user is authorized using the keys.
The owner carries out the necessary operations with cryptocurrency.
Turns off the device until the next session.
If you are just trying your hand at the cryptocurrency market, take the advice of Merehead experts to create the right crypto wallet. It is quite possible that in the future you will become the owner of your own cryptocurrency platform, with the development of which our experts will help you. And so that you have no doubts about the success of your project, Marehead specialists are ready to provide Blockchain advice right now.