when you own a cryptocurrency you re given private keys to access it public keys are similar to account usernames they identify the wallet so that the user can receive tokens without revealing their identity private keys are similar to personal identification numbers that must be entered when creating a transaction the wallets that store these keys are usually accessed with usernames and passwords but can also use different login techniques 
hot wallets are applications connected to the internet and the cryptocurrency infrastructure which allows you to use them for a user the hot wallet is the interface for using and storing your cryptocurrency keys they are different from cold wallets which are devices or applications that store your private keys offline these can be an application on a device that doesn t connect to the internet or a device that looks like a usb thumb drive that stores your keys you can even write your keys on a piece of paper which is considered a cold wallet to use the cryptocurrency you have in cold storage you need to transfer the keys to your hot wallet cold wallets also called cold storage are considered one of the safest methods for securing digital currency types of hot walletsthere are various hot wallets available and many of them are free to download some wallets are specifically designed to be used in partnership with particular mobile web applications you might find one that only works with a particular cryptocurrency or ecosystem in addition some cryptocurrency exchanges will only accept transfers to and from specific wallets examples of hot wallets are metamask coinbase wallet and edge wallet metamask is designed for transactions using the ethereum ecosystem coinbase wallet is the wallet for the cryptocurrency exchange coinbase and edge wallet is designed to accept transactions using all of your digital assets because there are so many wallets with different designs and intents it s important for you to research hot wallets before downloading and using their services wallet developers have varying degrees of expertise various commitments to security and privacy and different priorities in mind when creating their wallets some might have fees others might not you might need to use one wallet that integrates with your internet browser for one currency and another wallet that is a dedicated application on the internet you might find cryptocurrency cold and hot wallets broken down into many categories like hardware software web desktop or mobile all the different categories and definitions exist because many businesses are trying to get you to spend money and writers academics and enthusiasts are trying to standardize cryptocurrency and blockchain definitions or demonstrate their expertise what s important to remember when you re reading about wallets is that it doesn t matter what it is called special considerationsthere are several aspects you should consider before deciding on your hot wallet most important are its security features and how you use them your cryptocurrency is only as safe as the way you store your keys any items stored in a hot wallet are vulnerable to hacks malware ransomware or any other method thieves can think of to keep your cryptocurrency safe consider some of these tips the old saying don t keep all of your eggs in one basket applies to many financial assets including cryptocurrency if you use more than one storage type or strategy you re minimizing the risks of theft and loss it s a good idea to keep only a small portion of your crypto assets in your hot wallet you might consider only putting the amount of cryptocurrency you need in it when you need it this strategy would mean storing most of your assets in a cold wallet and transferring what you need to the hot wallet for immediate or near future use you could also choose to keep your cryptocurrency tokens in accounts linked to the exchange you use some exchanges will store your cryptocurrency for you in cold storage these exchanges either subcontract custodial services and transfer your keys to them or have built data storage methods designed for key storage however if you keep your tokens in an exchange account and an attacker gains access to the exchange s network you could lose your cryptocurrency in the attack to help customers if this happens some exchanges are insured for the loss of customers assets if they the exchange lose them due to theft or failure of their systems and will reimburse you up to a certain amount if you maintain a substantial balance of cryptocurrency you re accepting the risk of drawing the attention of hackers or losing a significant portion of your holdings in an attack because many of the top digital currency exchanges allow users to transfer between various fiat currencies and cryptocurrencies you should only hold small amounts in your wallet you can convert the rest to your country s currency and place it in your bank account there might be fees for exchanging cryptocurrency for fiat currency and transferring the funds out of the exchange or removing it to store it but it s worth considering if you re not holding your cryptocurrency as an investment hot wallets and investingcryptocurrency investing is similar to stock market investing you own a cryptocurrency and wait for its fair market value to increase you could continue holding it or try to sell it to another investor at a profit however a hot wallet is a precarious place to store your cryptocurrency investments cold storage such as a paper wallet or other non connected methods might serve you better as you wait for your cryptocurrency s value to increase you could also use a custodial cold wallet such as a reputable regulated and insured exchange s cold storage or licensed digital asset custodian another option is to invest in a cryptocurrency etf that holds cryptocurrency so that you gain exposure to these assets without needing to secure them yourself 