UNDERSTANDING CRYPTOCURRENCY WALLETS

When it comes to cryptocurrency wallets, there is tons of information and a multitude of options. Here's a quick guide of how to understand and pick the best wallet for you.

Hot Wallets

A hot wallet is considered the least secure cryptocurrency wallet. This is when purchased crypto currency is left on the cryptocurrency exchange that is what bought on. When you open an account with an exchange, they automatically provide you with a hot wallet to store your acquired Cryptocurrency (e.g. Kraken crypto currency exchange). Although relatively secure (Similar to the security of an online bank), it is not as secure as holding your assets in cold storage on a physical device. However this is a portal all users will have to use and is considered the most easily accessible option to buy and sell as it is on the exchange and ready to go. There is additional cost as the hot wallet is automatically provided (below: Hot wallet provided from an exchange).

Warm Wallet

A Warm is the next step up in security. A warm wallet is a downloadable app to your phone of computer and allows you to transfer your cryptocurrency from the exchange into a warm wallet that is held by the user. This means that you have your cryptocurrency in your possession rather than it being held on the exchange wallet. This is also a compromise between security and accessibility as you can still easily transfer to the exchange and most warm wallets allow you to purchase cryptocurrencies direct from the app. (However you will get better rates buying from an exchange). There are no additional costs with warm wallets as they can be downloaded for free. (below: warm wallet dowloaded to your phone or computer).

Cold Wallet

A cold wallet is considered the most secure way of protecting your assets as you hold them on a physical device that is disconnected from the internet. The cold wallet is for long term holding of assets or for holding the bulk of your investments whilst you may have a small portion on a hot or warm wallet for regular, accessible use. The cold wallet has an initial cost up front to purchase a device and is recommended once a significant amount of Cryptocurrency has been purchased. (below: Cold wallet device).

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