This section was authored by Dmitry Tokarev, CEO at Copper.co
The key distinction between a hot and cold wallet is that hot wallets are connected to the internet, while cold wallets are not.
Hot wallets make accessing and transacting in digital assets easy. Cold wallets, on the other hand, are offline, which means signing keys are kept in physically isolated hardware devices with no connection to the internet.
Given that crypto is most vulnerable when it’s stored online, cold storage is considered more secure for the long-term custody of large balances – by everyone from long-term HODLers (crypto investors who buy and hold their positions regardless of price) to institutions who hold millions of dollars in funds.
That’s not to say that cold storage solutions have no disadvantages. Transaction times on cold wallets take longer than their online counterparts. Moreover, the physical medium is subject to risks as it may suffer physical faults, have internal software problems or be stolen.