What Is A Crypto Currency Cold Wallet?
Crypto currency is a form of digital currency which is brings secured by the cryptography and may have purchased by only crypto currency exchanges through online. This type of currency secure the online transaction without any interference of third party which make the payment secure from online hackers and from online fraud.
The crypto currency wallet is a virtual wallet from which you can do the transaction in the world of crypto arena. A digital wallet helps you in managing the digital currency and also allows you to interact with the financial online networks. With crypto wallets you can do the activities in the finance world also crypto staking and yield farming can be possible.
The wallets hold the information of yours in form of software where crypto currency public and private keys are being used.
We can categories the wallet in two categories: Hot wallets and cold wallets.
There are few differences between both wallets.
Hot wallets: It is one of the common wallets which are being used by their user because it is easy to build and use. These platforms are automatically created when we open account on any crypto exchange, DeFi platform or download it on our platform. It is usually used for everyday crypto activities like transaction etc.
This wallet always connected with the internet hence we can do the transactions or move the crypto assets in a jiffy. As we are always connected through the internet it is good to be a preventive in order to secure the privacy. For example we can use the Wire guard VPN protocol for hiding the private information.
How Hot wallets Works
A participant who buy or mining the crypto wants to get the digital coins after finishing the transaction for that reason they look for the digital wallets.
However hot wallets don't store the digital coins instead of repository it acts as facilitators and loggers for your crypto transactions. Basically crypto hot wallets need an public key which is username and private key which is user put secret pin , which only user know this makes the transaction using crypto wallet secure. The internet access is required to do any transaction in crypto wallet.
Different types of crypto wallets: there are three types of hot wallets available from which user can choose as per their need. Some wallets are even designed only for use web transaction. Below are their names.
1. Desktop wallets: This type of wallet is known as Electrum and Armory
2. Mobile Wallets: Under this the Edge and trust Wallet is used.
3. Hybrid Wallets: For example, BTC pay and Block chain.
Weakness of hot wallets: There are many drawbacks found by the user for using the hot wallets that's why many users choose cold wallets over hot wallet. Although the hot wallets are very easy to use they only need the internet connection for web transaction this is the major drawback of using hot wallets. The hot wallets needs only internet for using it means anyone who has internet acciblilty might be possible to access the data under hot wallets. There are hackers who are expert in hacking account with internet.
Cold crypto wallets: This wallet is opposite in use from hot wallet and even more secure. The trick for using wallets is out small amount in hot wallet and put the larger amount in cold wallets as cold wallet is highly secure. The internet connectivity is not required in using cold wallets, although user can connect with internet for doing any transaction but it is not mandatory to have internet connectivity.
There are two types of cold wallets for storing crypto money:
1. Hardware Wallets. This type of wallets is more secure than other paper wallet. The hardware wallets as the name says something in hand like USB stick, to store the private keys. With the use of hardware wallets user can make safe the money from any attacks by the hackers.
To use the hardware wallet first the crypto money is being concerted from hot wallet to hardware mode, then user need to connect the wallet from software to this type of wallet name is Trezor and Safe pal.
2. Paper Wallets: The cold wallets options other than hardware wallet are to use paper wallets. In paper wallets the user can store the crypto money in papers like private key and public address. This type of cold wallets is also considered to be safer as they also don't need any internet connectivity to make any transaction. So basically the paper wallets are a piece of paper which uses keys and OR codes to do crypto transaction.
At last it is being said that crypto currency cold wallets are the wallets which is use by the user more frequently for having more security.