Like cash, you shouldn’t just leave cryptocurrencies lying around in your pocket, you should have a wallet for it. For this, there are many different wallets that you can use for your cryptocurrencies. This article explains how you can store cryptocurrencies with different wallet types.
Different types of wallets:
Hot wallet:
Hot wallets represent a digital wallet where you can download an application or browser extension either on your smartphone or on your laptop. This allows you to store your cryptocurrencies online and handle transactions quickly.
If you’re doing many transactions, you should use a hot wallet. It is also very comfortable if you use dapps, as you can connect easily to them.
The most popular Hot wallets are:
MetaMask, Trust Wallet, Phantom, Keplr Wallet & more.
Cold wallet:
With a cold wallet, you have a physical device that is not connected to the internet. This physical device is often something that looks like a USB stick, on which you can store the private keys for your cryptocurrencies offline. Cold wallets are also known as hardware wallets.
Storing your tokens offline protects them from cyberattacks. So, if you mostly want to store your cryptocurrencies for the long term, you should use a cold wallet.
Connecting a cold wallet with a hot wallet:
As you see, a cold wallet has different advantages, and a hot wallet has different advantages. What if you could combine the positive security aspects of a cold wallet with the comfortable usage of a hot wallet? Sounds great? It’s possible. We show you how to do it.
First, you need a cold wallet, most popular, a Ledger. Also, you need a hot wallet, in our example, MetaMask. Simply google it and add it to your browser as extension for free.
Once you own both, complete the regular setup for both and then find the “account” sign on your MetaMask wallet, click on it and select “add account or hardware wallet”.
Then you can connect your Ledger, plug your Ledger directly into your computer, then unlock it and open the Ethereum app. Connect it with your computer, approve it on your Ledger, send a test transaction for both (receiving and sending) and you’re done. Now you can use your hot wallet with the safety of a cold wallet. Remember that you still need to verify each transaction with your Ledger.
Advantages and disadvantages of each wallet type
Hot wallet:
Advantages:
- User friendly
- Easy accessibility
- Location-independent sending and receiving of tokens
- Ideal for frequent trading
Disadvantages:
- Higher risk of hackers and cyber-attacks due to online access
Cold wallet:
Advantages:
- Offline storage protects you from hackers and cyberattacks
- Very secure for holding tokens for a long time
Disadvantages:
- Unfavorable for frequent transactions
- You can’t easily access it everywhere & anytime
Security measures and best practices
Your security and also your wallet security comes first, which is why we will show you a few security measures that you should always follow to protect yourself and your tokens in the best possible way. If you use hot wallets, make sure that you don’t hold more than you need for your daily trading. If you have more cryptocurrencies than you need for your daily trading, you should store them in a cold wallet.
Furthermore, you should always use secure passwords and store them offline and not on the same device. One of the most important things is to use a trustworthy wallet, where your tokens are protected from scams.
With a hardware wallet, you should make sure that you buy a trustworthy device directly from the original provider to avoid manipulation of the device.
You should write the required seed phrases (12 or 24 random generated words to protect your wallet) on several pieces of paper and not store them on your cell phone. Keep them in protected places that are preferably only accessible by you.
In summary, store your tokens on a cold wallet for the long term and tokens that you use for trading daily should be secured on a hot wallet. However, make sure you follow all the security measures and that you have a secure wallet.
For more information about wallets, check out our other blogs at Uptota.com.
