Hot Wallet vs Cold Wallet-What are the benefits?

Hot Wallet vs Cold Wallet-What are the benefits?

If you have been dealing in cryptocurrencies for quite a while, you must have witnessed numerous discussions around various types of crypto wallets aka hot wallets and cold wallets. You may often find it difficult to catch up with these discussions because of the technicalities in the functional aspect of these devices. In order to give you a better picture of the scenario, WCT Academy presents a comprehensive infomania on hot wallets and cold wallets, so that you don’t miss out on any details!


Hot Wallets and Cold Wallets-What is the difference?

The fundamental difference between a cold wallet and a hot wallet is, a cold wallet is broadly a crypto wallet where the private keys are held by the owner in an offline environment. The two most common forms of cold wallets are paper wallets and hardware wallets. In the case of a paper wallet the public and private key are both printed on a paper in the form of QR codes, whereas in case of hardware wallets you have a physical device to store private keys for various crypto assets.

The functioning of a hot wallet is exactly the opposite of a cold wallet, as a cold wallet works in an offline mode and a hot wallet works in online mode where the wallet connects to the internet. In easier terms hot wallets are applications connected to the internet responsible for storing private keys in an online environment.


Working of a Hard Wallet vs Cold Wallet


Upon developing an understanding of the fundamental differences between a cold wallet and a hot wallet, we are all set to understand the working of both categories of wallets. Since hot wallets are connected to the internet, they are a form of digital storage that can be accessed on your computer or phone. This also means that crypto transactions happen faster over the blockchain. Hot wallets are often times connected to a centralised exchange, such as Binance or Coinbase, which is advantageous for making quick trades, but also makes them far less secure than cold wallets

However for cold wallets, transactions are relatively slower but highly secured. The transactions are initiated online and then shifted to offline mode for private key signing by the wallet. Once the transaction is signed offline in the cold wallet, then the details are sent online and the transaction gets executed.



Hard Wallet vs Cold Wallet- Which one do you need?

Another question that may pop up after discussing the fundamental and technical aspects of hot wallets and cold wallets is, which one suits your needs the best. The answer to this is a subject of your needs, but on a broader scale we can still classify the users who need either of these two wallets.

As we know a hot wallet is connected to the internet, therefore it is generally suitable for traders and people looking for quick online transactions. However, hot wallets are prone to cyber attacks and it is highly-advisable to use proper security measures when using them.

Whereas, a cold wallet is highly recommendable for people who want to store their cryptocurrencies for a long period of time with high level of security. With the private key being offline, your assets are completely secured when using a cold wallet, as long as you remember the private key.



One key principle that will always help you make profits in the longer run, irrespective of whatever market it be, is to keep learning and growing, whatever be the market situation. At WCT we always stand by this thumb rule, and will always stay committed towards providing the best educational content to our community, helping everyone grow!

We hope to see you guys soon with some new piece of infomania, till then keep safe, keep learning and don’t forget to tune-in to our socials, so that you don’t miss out on any of our updates. 


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