Want to Use Hot Wallet? Understand These Things First
Did you know that a wallet is required to store your crypto assets? Previously we have discussed cold wallet or cold storage. If you haven’t read it yet, let’s visit the article Know Cold Wallet Crypto and Its Types. Well, now we will discuss the type of wallet that is no less important, namely the hot wallet.
Definition of Hot Wallet
Hot wallets are wallets created to make it easier for users to store, send, and receive various crypto assets. Unlike cold wallets, hot wallets usually consist of a set of private keys stored in software that is connected to the internet. The online system in this wallet makes it easy to use for everyday transactions. Besides being able to facilitate transactions that occur on the exchange, this wallet also functions to protect the assets stored in it. Your entire transaction history will also be recorded in the hot wallet. Almost all hot wallets are not paid, but there are some hot wallets that implement a paid system such as Electrum.
Types of Hot Wallets
Desktop Wallet
As the name suggests, a desktop wallet is a software wallet designed specifically for use on computers and is low-risk. However, you need to be careful if your computer is infected by a virus or is damaged. Examples of these wallets are Exodus, Metamask, and Mist.
DApps Wallet
DApps Wallet or Mobile Wallet offers the concept of an all-in-one wallet to make it easier for users. You can download this app-based wallet on your mobile. In addition, some dApps wallets have become non-custodial wallets allowing users to have complete control over their wallets. DApps wallet also uses code phrases that only wallet users know to increase system security. Examples of dApps wallets are Copay, SafePal, Metamask, Trust Wallet, Mycelium, and JaxxLiberty.
Also read: Getting to know DApps, Peer to Peer Applications in Crypto
Cryptocurrency Exchange
There are several exchanges that provide wallets for their users. However, this option is quite risky because hackers can hack the exchange and penetrate the wallet there. To minimize losses in the event of a system breach, you can choose an exchange that has insurance. Examples of these wallets are Coinbase Wallet and Binance Chain Wallet.
Advantages of Hot Wallet
- With an internet connection, access to hot wallets is relatively fast and practical
- When you lose your private key, access is easy to restore
- Most hot wallets can be accessed for free
- Hot wallets can be used to access all types of crypto assets
Disadvantages of Hot Wallet
- When compared to cold wallets, hot wallets are more vulnerable to hacking or other cyber attacks. This can happen because the hot wallet system must be connected to the internet network.
- If you use a custodial wallet where a third party holds your private key, the private key will be stored on the exchange server.
Hot Wallet Examples
Electrum
This Bitcoin wallet is quite easy to use. Electrum is the oldest Bitcoin wallet established in November 2011. Known for its high level of security, Electrum can verify all transactions in the user’s history using SPV (Simple Payment Verification). Electrum which is also an open-source software wallet can be integrated with hardware wallets. If you use Electrum, your private wallet key will not be shared with the server. So, you can control each other’s private keys.
Coinbase
Coinbase is a user-friendly centralized exchange (CEX) platform. Apart from being an exchange, Coinbase also offers two wallet options for its users, namely a web-based hot wallet and a Coinbase hot wallet available for Android and iOS.
Exodus
Just like Coinbase, Exodus is a decentralized exchange (DEX) platform that provides wallets for its users. Exodus software is integrated with Trezor Model T and Trezor One which supports 138 cryptocurrencies. You can access Exodus via Windows, Mac, Linus, Android, and iOS.
Blockchain.info
Blockchain.info is a wallet that is integrated with Shapeshift and has four types of wallets, namely hot wallets, web wallets, mobile wallets, and multi-currency. This wallet only supports some popular coins like Bitcoin, Ethereum, Bitcoin Cash, Stellar, and USD PAX.
Tips for Using Hot Wallet
Even though it’s still risky, it doesn’t mean you should avoid hot wallets because they have profitable advantages if used properly. Here are tips for those of you who want to use a hot wallet:
- Do not use hot wallets to access large amounts of crypto assets.
- Because hot wallets are vulnerable to cyber attacks, you have to be careful in choosing them. Choose a trusted hot wallet with a good reputation and track record.
- Be careful in determining the wallet address network destination when transacting. For example, if you want to send tokens or coins that use the BEP 20 network such as BNB, Pancakeswap, Binance USD (BUSD), C.R.E.A.M, and LDX, make sure the recipient address you copy is the address from the BEP 20 network.
- Hot wallets are very suitable for trading, while cold wallets are suitable for savings accounts. You can move your trading funds from a hot wallet to a cold wallet as a preventive measure to improve security.
How about you, which wallet are you interested in using? Can you tell the admin in the comments column? Continue to follow our articles so that you understand more about crypto. Don’t forget to visit the Litedex, Instagram, Twitter, YouTube and TikTok websites to keep getting updated information from us.
