Cryptocurrency Trading: Difference between a Hot & Cold Wallet.
Hot & Cold Wallet
Every crypto wallet falls into either one of these 2 categories: Hot wallet or cold wallet. Both have their advantages and drawbacks and choosing the best wallet for you comes down to personal preference and trading style.
Wallets that are categorized as hot wallets include the desktop wallet, online (web) wallet, and mobile wallet. Wallets in this category are constantly connected to the internet. Due to its constant connectivity to the Internet, it is more convenient and provides a more efficient platform to send and receive funds.
It is either a software downloaded to the device or linked to the exchange account. However, it can be a blessing and also its curse. The constant connectivity to the Internet makes it vulnerable to phishing, virus attacks and malware. There is also the risk of losing your funds if you store your keys in these hot wallets, in turn damaging or losing them.
Cold wallets include paper and hardware wallets. It is generally more secure than its hot counterpart. It is only connected to the Internet when a transaction is conducted, making it more difficult to hack. Its drawbacks include a possibility for transactional errors and its comparatively slow nature. There is also a risk of the wallet being damaged or lost.
Hot or cold, both wallets have their supporters and detractors alike. You could consider splitting your funds into both hot and cold wallets, depending on your trading style.