Wallet, Cold Wallet, Hot Wallet

A “wallet” is a hardware device or software program that contains cryptocurrency keys (i.e., the passwords used to access and manage ownership of crypto assets).

Cold Wallet: A cold wallet is a cryptocurrency wallet that is not connected to the internet. These include paper wallets (where the private keys used to manage the wallet are written on a physical piece of paper and accessible only to the holder of the paper), offline desktop wallets (where the private keys are stored on a computer that is never connected to the internet) and modern hardware wallets (where the private keys are stored on a small USB stick that is protected by a PIN that must be keyed physically). Cold wallets are considered more secure than hot wallets because stealing from a cold wallet would require physical possession of the wallet (together with any PINs or passwords needed to access the wallet).

Hot Wallet: A hot wallet is a cryptocurrency wallet that is connected to the internet. These include web-based wallets, mobile wallets, and online desktop wallets. Hot wallets are easy to use because the private keys necessary to manage the wallet are stored together with the wallet online. However, they are the most vulnerable to attack for the same reason. Savvy users are unlikely to hold significant amounts of cryptocurrency in hot wallets.