What is a Cold Wallet?#
A "Cold Wallet" is a hardware device used to store cryptocurrencies, characterized by offline storage of private keys and disconnected from the internet. Cold wallets are typically not directly connected to the internet, providing higher security to prevent risks from network attacks, malicious software, or hacker intrusions. The appearance of a cold wallet is usually similar to a USB flash drive, a credit card, or even just a piece of paper. When a transaction is needed, users can connect the cold wallet to the network to sign the transaction, then disconnect it again to ensure the security of the private keys. Users of cold wallets have complete control over their private keys and can access their cryptocurrency assets whenever needed. The most common cold wallets currently include Ledger and others.
What is a Hot Wallet?#
A "Hot Wallet" refers to a wallet that stores and manages cryptocurrencies on a device connected to the internet. Hot wallets are typically software wallets or wallets on exchange platforms. In contrast to cold wallets, hot wallets are connected to the network, allowing users to quickly trade digital assets at any time. Hot wallets are commonly in the form of apps, browser extensions, and other software forms. The most common hot wallets currently include MetaMask and others. If we compare virtual currencies to cash, a cold wallet is like a safe at home where we store cash, while a hot wallet is like a bank passbook we receive after depositing cash in the bank.