When you start investing in cryptocurrency, you must manage your investments with safety and security. To do this, it is important to understand the different options available for storing your investments.
Hot wallets are used to store, send, and receive cryptocurrencies. This type of wallet is always connected to the internet. With a simple click here and there, hot wallets offer additional convenience when trading. With a constant connection to the cryptocurrency network, hot wallets may be more vulnerable to hackers and theft. To prevent this, hot wallets are linked to public and private keys that can be used to make transactions more secure. Your private key is kept secret and allows you to access your wallet so you can check balances and initiate transactions. Your public key serves as a username to identify your wallet. This way you can safely send and receive tokens without revealing your identity. Some traders prefer to only keep a small balance in their hot wallet to maximize security. There are different hot wallets available like MetaMask and Coinbase Wallet that only work with specific exchange platforms. Some hot wallets come with fees, while others might require a specific internet browser to work.
Cold wallets work similarly to hot wallets in the sense that they also store cryptocurrencies. The major difference between hot and cold wallets is that cold wallets store your private keys offline. Cold wallets are better at preventing unauthorized access since the wallet is not connected to the internet. With this added security, you will be less prone to hackers and theft. Because of this, you might feel more comfortable keeping a larger balance in your cold wallet. Since your private key will be stored offline, you will need to transfer your coins to an online platform to send or receive cryptocurrencies. While the process of making transactions may become more burdensome, cold wallets provide the highest level of security when it comes to storing your coins. You will need to purchase a device to keep your cold wallet stored on. Cold wallets can be kept on USBs, CDs, hard drives, or paper wallets.
Paper wallets are the most basic form of cold wallet storage. These were some of the first wallets established early on before cryptocurrency became widely popular. While technology has developed over time, paper wallets remain a secure way to store your keys. As the name implies, paper wallets are a piece of paper with your private and public keys printed out. Some will also come with a readable QR code you can scan with a phone or app. When your keys are printed, they are removed from the cryptocurrency network for security purposes. Your tokens will remain secure in your wallet. The only way your paper wallet can be accessed is with your keys. While secure and free, you must be extra careful not to lose your paper wallet. Consider keeping it in a waterproof or fireproof safe or placing it in a safe deposit box.
There are several ways to start investing in cryptocurrency. Be sure to understand the risks and benefits involved with each option available.