Warlands Academy: Hot Wallet and Cold Wallet how are they similar and how do they differ?

A hot wallet is a cryptocurrency wallet that is connected to the internet, while a cold wallet is a cryptocurrency wallet that is not connected to the internet. The main similarity between the two is that they are both used to store cryptocurrencies.

The main difference between the two is the level of security they provide. Cold wallets, being offline, are considered to be much more secure than hot wallets, as they are less susceptible to hacking and other forms of cyber attacks. Cold wallets are typically used to store large amounts of cryptocurrency for long-term holding, while hot wallets are more commonly used for everyday transactions and short-term storage.

How the cold wallet works?

A cold wallet, also known as a cold storage wallet, is a way to store cryptocurrency offline. The private keys, which are used to access and manage the cryptocurrency, are stored on a device that is not connected to the internet. This offline storage provides an added layer of security, as it makes it much more difficult for hackers to gain access to the private keys.

There are several different types of cold wallets, including:

• Hardware wallets: These are physical devices, such as a USB drive, that store the private keys offline. They are considered to be one of the most secure options, as they are not connected to the internet and are often resistant to physical tampering.
• Paper wallets: These are simply printed copies of the private keys, often in the form of a QR code. They can be stored in a secure location, such as a safe, and are also considered to be very secure.
• Brain wallets: These are a type of paper wallet where the private key is generated from a passphrase that is memorized by the user.

To use a cold wallet, one first needs to create the wallet by generating a private key, then store the private key offline, in the format chosen (hardware, paper, brain) . Then, in order to access the cryptocurrency stored in the cold wallet, you will need to import the private key into a software or online wallet. This process will allow you to access and manage your cryptocurrency, but it should be done with caution as connecting a cold wallet to the internet will compromise its security features.

How the hot wallet works?

A hot wallet, also known as a hot storage wallet, is a way to store cryptocurrency online. The private keys, which are used to access and manage the cryptocurrency, are stored on a device or server that is connected to the internet. This online storage provides easy accessibility and fast transaction times, however, it also makes it more susceptible to hacking and other forms of cyber attacks.

Hot wallets can be either software-based or web-based.

• Software-based hot wallets: These are programs that can be installed on a computer or mobile device. They are designed to store the private keys on the device and allow the user to access and manage their cryptocurrency. Examples include the official wallets of various cryptocurrencies, like the Bitcoin Core wallet, and multi-crypto wallets like MyEtherWallet, Exodus, etc.
• Web-based hot wallets: These are online platforms that allow users to access and manage their cryptocurrency through a web browser. They store the private keys on servers that are operated by the company providing the service. Examples include exchanges like Coinbase, Binance, etc.

Hot wallets are more convenient for frequent transactions and for holding small amounts of cryptocurrency for everyday use. They are also used for trading on cryptocurrency exchanges. However, since they are connected to the internet, it’s important to use hot wallets with trusted providers and to be aware of the security risks. It’s also advisable to use a strong password and enable 2-factor authentication to protect your account.