Types of Cryptocurrency Wallets

An Introduction to Paper Wallets, Hot Wallets, Cold Wallets, and Hardware Wallets.

Several distinct categories of wallets exist and differ in security, usability, and accessibility:

Hot Wallet/Cold Wallet. A hot wallet refers to a wallet that is connected to the internet; the opposite, cold storage, refers to a wallet that is not connected to the internet. Hot wallets allow for the owner of the account to send and receive tokens; however, cold storage is more secure than hot storage and offers many of the benefits of paper wallets without as much risk. Most exchanges allow users to move holdings from hot wallets (which is the default) to cold wallets with the press of a few buttons (Coinbase refers to cold/offline storage as a “vault”). To withdraw holdings from cold storage requires a few days, which circles back to the accessibility versus security dynamic of hot storage and cold storage. If you’re interested in holding a crypto asset for the long-term, cold storage within your exchange is the way to go. If you plan to actively trade or engage in the trading of holdings, cold storage is not a feasible option.

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