Types of wallets for cryptocurrencies
How to store cryptocurrency: pros and cons of hot and cold crypto wallets
The cryptocurrency is stored in an electronic wallet. First, define what a crypto wallet is and how it functions.
The crypto wallet provides operational capabilities for interacting with the blockchain network. They offer connection tools for making transactions on the blockchain. The critical data they generate includes public and private keys and an alphanumeric "address" based on these keys, which is where cryptocurrency can be transferred. The wallet doesn't remove your funds from the blockchain. It just moves them between addresses.
Keep in mind that your address is available to anyone you want to send your funds to. Still, your private key, which provides access to your cryptocurrency, must remain confidential to ensure the security of your capital.
Wallet options for storing cryptocurrencies are divided into two main categories - hot and cold.
What is a hot wallet?
Hot storage crypto wallets are connected to the Internet. The plus is that with hot storage, the cryptocurrency is available instantly. They are easy to set up, and if you are thinking about how to store cryptocurrency for maximum convenience, nothing compares to hot bitcoin wallets for getting BTC quickly. Most of them are available via phone these days, and therefore hot crypto wallets are great for traders and other people who need to access their capital frequently. Hot wallets also tend to support a broader range of cryptocurrencies than cold wallets. However, their main drawback is that they cannot be protected entirely from hacking a web-based storage system. In addition, wallets and exchanges are beginning to be regulated, so the responsibility and protection of customers increases, but there is also uncertainty about taxation and government intervention.
What is a cold wallet?
The cold storage crypto wallet is not connected to the Internet. As a result, it is the most secure option since it cannot be hacked, even if the fund's transfer is not as smooth and fast as with hot storage. This makes it an attractive option for long-term investors who want to get HOLD, as they are waiting for their cryptocurrency to become more expensive for several months or years. In a cold-storage crypto wallet (famous examples are Trezor and Ledger), your cryptocurrency is stored offline, using physical equipment to keep the private key. For this reason, while a hot wallet based on web technologies can be created for free, you will have to pay about $100 for a cold wallet for storing cryptocurrency.
Even though hot wallets are more secure, even the best wallet with cold storage has one serious security problem - the human factor. You manage your funds, so you need to be sure that you will not lose your wallet, and many experts advise you to keep it in a safe deposit box. Since a significant fee is charged for the purchase of a cold wallet, and it provides more reliable protection, many investors choose this option for large amounts, and smaller pieces are stored in a hot wallet, just as you would keep your fixed capital in a bank, and a few bills in your back pocket.
When deciding how to store cryptocurrency savings, it is necessary to consider another important factor - interest. When using a cold storage wallet, you manage your funds, so you will never earn interest on your capital. He's just lying around.
However, a new phenomenon is emerging. If, until now, most of the hot wallets offered only a secure way to store your funds, then a new version of the hot wallet is taking over the world of cryptocurrencies — and this is a wallet that brings interest.
Wallets that bring interest
A wallet that brings interest allows you to receive passive income while doing your own business. Instead of thinking only about how to store cryptocurrency safely, now, before choosing a wallet, you need to ask yourself where it can be done most profitably.
In most cases, all you have to do is open an account and make a deposit. Then your funds will be transferred to a closed savings account for a certain period to receive passive income. The amount of interest that you can receive will depend on your deposit size and the period you have chosen to block the savings account. The wallet will then use your funds to provide loans to other clients, trade, or for various other purposes.
In many ways, this is very similar to how a traditional bank offers interest, using your funds to buy assets or provide loans. However, the main difference is that the interest wallet offers a percentage several times higher than the average 1% provided by the bank, and there is never any danger of negative rates.
When deciding how to store cryptocurrency, you need to consider several factors, including your chosen wallet's security, transparency, and profitability.
Crypto arbitrage is widely recognized as one of the lowest-risk types of fiat or cryptocurrency investments, but at the same time, very profitable. When choosing a way to store cryptocurrencies, most of us think about finding the highest possible interest rates. On the Intelfin platform, you can receive a guaranteed return on investments reaching 108% per year. In addition, the company has an expert support service offering personal assistance to our clients.
When it comes to choosing how to store cryptocurrency, there are all types of wallets, and the choice of wallet type depends on your capital plans. For large amounts intended for long-term investments, cold storage is safest, although in this case, your money will lie idle, earning nothing, and you need to be incredibly careful with the device so as not to lose all the money. On the contrary, a hot wallet is preferable for small amounts that are constantly moving for shopping or trading. And of course, if you want to receive passive income and make your money work for you every minute, then a wallet with interest is by far the best and most profitable option.