Hot wallet vs Cold wallet – what's the difference

Marketing Manager

Apr 7, 2023
3 min

Say you’re just starting your cryptocurrency experience. One of the first questions you need to answer is which crypto wallet is better for you - the hot or the cold one? And the answer, as trivial as it may sound, is: it depends!

We will explain what the difference between them is and you will surely be able to make your own conclusions.

Hot or Cold? Looking for the best balance between safety and dynamism

Maybe you have heard at some point that people send and receive cryptocurrencies, that they sell them on special cryptocurrency exchange markets. Regularly these people use the well-known hot wallets. Their name refers to the active use of cryptoassets that these wallets enable. These wallets initially fulfill their main role - to store cryptocurrencies. What makes them special is connection to the network.They are also easy to use, because you can access them through any device that is connected to the Internet. Therefore a hot crypto wallet allows you to perform basic operations such as storing, sending and receiving your cryptocurrencies quickly. It is perfect for daily transactions in small amounts. However, every pro has a con. Since this wallet is always connected to the network, in case someone gets your password to it, your cryptocurrencies can be at great risk of being stolen quickly without leaving a trace.

On the other hand, the cold wallet fulfills the same main function of storing cryptocurrencies, but with a fundamental difference - it does it outside the network. To make this possible, these wallets are in essence hardware. They regularly come in the form of a USB device that can be connected to a computer or mobile device, and operate with the help of apps installed on them.

Considering that cryptocurrencies are stored outside the network, these wallets offer optimal protection against cyber-attacks, since the private keys cannot be stolen. Therefore, their greatest advantage is that they allow the storage of large amounts of crypto over a long period of time. Precisely because of this feature, its main disadvantage is the lower convenience regarding the management of your own cryptocurrencies. If you want to transfer them, you will have to go through many additional steps in order to take them to an exchange.

Now, if we directly compare these two options in terms of security, we will find that the cold wallet is definitely more secure, but not infallible. If your USB device suffers physical damage or if you forget your private keys, you will hardly be able to access your cryptocurrencies again, in other words, they will be lost forever. On the other hand, if you have a hot wallet, it is possible that your provider will help you recover your access key to it if you forget it.

Of course it is difficult to conclude which cryptocurrency wallet is better without first knowing the user's needs. But we do have one certainty - we have understood the particular needs of our clients. On the one hand they want greater convenience in managing their crypto, i.e. flexibility and speed in making use of it. On the other hand, they want a high level of security to protect their assets. That is why in our Blackcatcard ecosystem our partner Manerio UAB offers users a hot wallet with an additional feature - it is a custodial wallet.

But... What is a custodial and non-custodial wallet?

In practical and simple terms, a custodial wallet is one in which your personal data is kept by a third party, while with a non-custodial wallet only you have access to that data. Based on this, it is possible to draw two quick conclusions:

  • Every cold storage wallet is a non-custodial wallet.
  • A hot storage wallet can be either custodial or non-custodial.

If you forget the password of your non-custodial wallet, the damage would be irreparable, as no one would be able to access it again. For custodial wallet, on the other hand, you only need a password to access the app. If you forget it, you have the possibility to restore it with the help of the support team. This kind of wallet is offered by Blackcatcard’s partner.

In this sense, the custodial wallet in our fintech ecosystem makes it easier for users to manage crypto in a secure and more dynamic space. First of all, with us you have banking level security to protect your cryptoassets. Secondly, you can convert your fiat money to cryptocurrencies or vice versa in a single app, meaning you won't need external exchanges, as all your transfers can be carried out in a single controlled place. And if you forget your password – don't worry, contact us and we will help you recover it.

In conclusion, hot or cold?

The answer will depend on your needs. If you want to use a cold wallet, remember that you will have a higher level of privacy, which will be optimal as long as you take measures to always remember your private keys. You will also have to bear the costs. You must buy a physical USB device, which can be found on the market for 100 Euros or more.

We at Blackcatcard, thanks to this product offered by our partner Manerio UAB*, have set the task of offering you the best balance between security and convenience. Storing your cryptocurrencies in our ecosystem is free of charge, as well as transferring them between Blackcatcard users. You will also be able to receive them from any other wallet free of charge from us. We have also optimized our service to offer you the most competitive fees in the market if you wish to transfer to any other wallet.

*An integrated crypto exchange and custodial crypto wallets are provided by our partner Manerio UAB. You can find more information here.


Are custodial wallets safe?

Yes, while non-custodial wallets may be more private, our custodial wallet perfectly combines security and convenience.

Is it safe to keep crypto in a hot wallet?

It is safe and ideal for small quantity storage and daily transfers.

Can you lose crypto in a cold wallet?

If you forget your password or your cold wallet suffers any damage, crypto can be lost. Otherwise your assets will be fully protected.

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