Hot wallets vs. cold wallets: Key differences and how to choose
Dec 8, 2025・6 min read
A crypto wallet stores your private keys, which allow you to access and manage your cryptocurrencies and other digital assets. Hot wallets are always connected to the internet, making it easy to send and receive coins quickly but introducing certain security risks. Cold wallets keep your private keys offline, usually on a hardware device, and offer stronger protection from online threats but less convenience and flexibility.
This article compares hot wallets versus cold wallets to help you decide which is best for your crypto transactions. We’ll explain how each type of wallet works and explore its advantages and risks.
How do hot wallets work?
A hot wallet is an app or piece of software that stores your private keys and lets you access and use cryptocurrency. They’re called hot because they’re always connected to the internet. This makes them perfect for faster Web3 activities, but also more susceptible to common online threats like phishing scams and hacking attempts.
When you set up your hot wallet account, you’ll get public and private keys. A public key is what others use as an address to send tokens your way. Private keys are long strings of letters and numbers that allow you to access your crypto funds and make transactions on the blockchain.
Anyone who knows your private key has access to all the digital assets stored in your wallet. So you’ll need to keep that information safe on your device (non-custodial) or through the wallet provider’s protections (custodial).
Since they’re always connected to the web, hot wallets are considered riskier than their cold storage counterparts. But they remain a popular option because they’re cheaper, user-friendly, and always available for quick transactions.
Common types of hot wallets
Some hot wallets focus on portability, while others offer integration with decentralized apps (dApps) or improved desktop security. Here are the main types:
- Mobile wallets: These hot wallets are apps you install on your smartphone or tablet. They’re convenient for fast transactions and portfolio checks on the go. Popular options include MetaMask and Trust Wallet.
- Desktop wallets: Installed directly on your computer, these wallets let you manage your crypto on a larger screen and alongside other trading tools. Examples include Exodus and Electrum.
- Browser extensions and Web3 wallets: These cryptocurrency wallets connect through your browser and usually link directly to dApps. MetaMask and Phantom are among the most popular Web3 wallets.
- Exchange wallets: Most crypto exchanges, like Binance and Coinbase, offer custodial wallets. The exchange holds your private keys and manages wallet security on your behalf. This setup is convenient, but it also means you rely on the platform to protect your crypto assets.
Pros and cons of hot wallets
The biggest advantage of a hot wallet is convenience. Since it’s always connected to the web, you can access your crypto at any time and send or receive tokens without an additional hardware device. This makes hot wallets a good choice for frequent traders and non-fungible token (NFT) explorers. These wallets are also simple to set up and often free.
However, the constant internet connection exposes hot wallets to security risks. Hackers can target you through fake links and web pages, luring you into sharing your recovery phrase. They can also use malware to try and steal stored keys. So while they’re convenient, hot wallets work best when paired with strong security habits, such as using two-factor authentication (2FA) and keeping your recovery phrases offline and secret.
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How do cold wallets work?
A cold wallet is completely offline, making it one of the best crypto storage methods if you're concerned about security. Instead of connecting to the web, a cold wallet stores your keys on a physical medium, like a hardware device or card. When you want to move crypto, the wallet creates a transaction offline, signs it internally, then broadcasts it through a connected computer or mobile app.
This means your private key never leaves the device. Plus, cold wallets aren’t exposed to malware and other online threats. The main trade-off is convenience – you’ll need to connect or scan your device whenever you want to make a transaction. For long-term investors, that extra effort can be well worth the added protection.
Common types of cold wallets
All cold wallets store your private keys offline, but some are built as secure devices, while others use physical backups or newer card-based technology. Here are the most common types:
- Hardware wallets: These are small electronic devices that connect to your computer or phone only when you want to sign a transaction, and keep your keys locked inside a secure chip. Modern hardware crypto wallets like Ledger Nano X and Trezor Safe 3 now support multi-chain assets and NFTs, providing you with added flexibility. Some models, like ELLIPAL Titan and Keystone 3 Pro, even offer air-gapped protection or biometric verification for added security.
- Paper wallet: A paper wallet is a printed sheet containing your public and private keys, which you can use via scannable QR codes. This is a low-cost option, but a paper wallet can get lost, stolen, or damaged easily.
- Near field communication (NFC) wallets: These hardware wallets store your keys on physical cards or chips, and connect to your phone or computer through wireless connections. You can tap a wallet card like Tangem on your NFC-enabled phone to make contactless transactions with crypto.
Pros and cons of cold wallets
The main advantage of a cold wallet is offline security. Because your private keys are stored on a device or card that’s not connected to the internet, you’re protected from common online threats like phishing attacks and malware. That’s why cold wallets are best for investors who hold large amounts of cryptocurrency or assets and rarely trade them.
The biggest drawback is convenience. Every transaction requires access to the physical wallet, which can slow down frequent traders. Cold wallets also come with a higher price tag, typically between $80 and $400. Finally, even though they’re considered safer than hot wallets, you still need to keep the physical device and seed phrase protected from damage and theft.
Key differences between hot and cold wallets
Let’s sum up the important distinctions between hot and cold wallets.
Choosing between hot and cold wallets
Deciding between a hot versus cold wallet comes down to what matters more – convenience or security. If you want easy access to your crypto anytime, anywhere, hot wallets are designed for you. If your main goal is protecting your assets, cold storage wallets offer the best crypto wallet security in 2026.
Traders often lean toward hot wallets for their flexibility and speed, especially when moving funds between exchanges or exploring dApps. Investors usually opt for cold wallets to safely lock down their assets. Many people also use a hybrid approach – a hot wallet for everyday access and a cold one for long-term storage.
Simplify wallet tracking with CoinTracker
Both hot and cold wallets are valuable resources for crypto traders and Web3 enthusiasts. Whether you opt for a hot wallet’s convenience or a cold wallet’s extra security – or a combination of the two – make sure the wallet you choose comes from a reputable source and offers plenty of safeguards. You’ll also need a way to easily view and track all the assets stored in your wallets and traded on exchanges.
Managing your crypto assets shouldn’t be complicated. CoinTracker lets you track your entire portfolio across multiple exchanges and wallets, all in one place. Join the two million users who rely on CoinTracker for a seamless crypto experience – start free today.
Disclaimer: This post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.
FAQ
What’s the difference between hot and cold crypto wallets?
Hot wallets keep your private keys on a dedicated device or platform, and they’re always connected to the internet. Cold wallets are offline and keep your keys on a separate hardware device or physical object.
What’s better for beginners, a hot or cold wallet?
Beginners usually start with hot wallets because they're often free, easy to set up and use, and convenient for trading and other Web3 activities.
How do hardware wallets store private keys?
Hardware wallets store private keys inside the device, on a chip. They sign transactions internally, so the keys never leave your wallet.
Do I need both hot and cold wallets for crypto security?
It’s not necessary to have both a hot and cold wallet, but it’s recommended. You can use a hot wallet for easy access and fast transactions, and store most of your tokens in a cold wallet for extra safety.