Hot vs Cold March 23 2018
So, you have a few Dash or a Bitcoin or some Ripple, now how do you store them? There are two options and what you plan on doing with your crypto is the deciding factor on what kind of storage you want to use. Wallet storage can be broken down into two kinds, hot wallets and cold wallets. Hot wallets are essentially storage that is connected to the internet, sites you’ve heard of like Kraken, CoinBase, BitStamp, where you can buy trade and store cryptocurrency. While these sites are convenient for daily movement of your crypto, they aren’t very safe. As with anything on the internet, they can be hacked. If you are holding your currency on a site and it is hacked, more than likely you wont get your money back and this has happened to most big sites at one time or another. So, if there is another option why would anyone every use a hot wallet? First, because of the convince, there are fees associated with moving your crypto back and forth between hot and cold storage and only in hot storage can you trade and sell. The other reason people use hot wallets is because cold wallets have their set backs as well. While cold storage isn’t vulnerable to hackers, cold storage is the reason 4 million bitcoin have been lost forever. Cold storage is storage of your cryptocurrency that is offline, either on a USB, paper wallet or a bearer item like a physical bitcoin. Cold wallets are typically used to hold large sums of cryptocurrency that aren’t going to be traded or sold for some time; they are the equivalent of a commodity just waiting to appreciate. Like most physical commodities they are susceptible to being lost and just like if your bar of gold gets stolen, if your cold storage wallet gets stolen, it’s gone and so is your crypto. In the end, hot versus cold comes down to if you’d want your money in a bank, where you can transfer it from account to account and make easy online payments but your account can be hacked or if you want your money in your wallet that you can leave in the back of your uber.
Here are a few articles discussing, hot versus cold storage, lost bitcoins and the hacking of trading sites: