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I would like to know what is a Hot wallet and what is a cold wallet?

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The simplest way to understand it is as follows:

Hot storage wallets are all the wallets, which are "stored" somewhere on the internet a.k.a wallets that are stored online - like your Binance account - this is the perfect example of a hot wallet. Pretty much, this is every wallet that can be accessed by simply typing a password and nothing else. Every account(wallet) that you have in your Metmask is also considered a hot wallet (except for cases where you have imported your paper wallet or Trezor, Ledger, etc.).

Hot wallets exist because of their ease of use and fast interaction. But they are not secure because you do not own the private keys for them and/or because they are connected to the internet. They are not recommended for the storage of large amounts of money.

Cold storage wallets are wallets, which you have full control off. You own their private keys and in most cases, they have one additional security step implemented, prior to sending a transaction. In most cases this is in the form of pressing a physical button to confirm the transaction ( if you own a Ledger wallet or a Trezor one ), and this is what makes them secure.

Cold storage wallets are the best option if you are looking to store most of your funds.

Hope that helped.

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  • You're confusing some stuff. By your definition Metamask is a cold wallet because "you have full control off" and is not stored on the internet (I can use it locally if needed). Also saying that a hot wallet is "every wallet that can be accessed by simply typing a password" is wrong. Isn't it possible to use Ledger/Trezor this way instead of fingerprint?
    – 0xSanson
    Oct 9, 2022 at 16:10
  • Hey there, I am referring to Metamask (more specifically, the wallets created via Metamask, not imported cold wallets like Ledger which just use Metamask as a propagator for the transaction) as a hot wallet, because as long as someone has "access" to your Metamask extension and its password, It can easily be hacked, because the private keys are stored in the extension. Trezor/Ledger wallets cannot be hacked in such a way because they require "physical" interaction like a button press on behalf of the owner of the wallet + the password that you type for them is also stored inside them. Oct 9, 2022 at 18:05

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