Cryptocurrency

Wallets

Brief Comparison of Hot and Cold Wallets

Let’s say you want to take a risky plunge and invest half of your savings in Bitcoin. Now, $25,000 worth of Bitcoin is sitting in your Coinbase account. Does that make you nervous? It should! What if Coinbase gets hacked? What if a cybercriminal manages to get a hold of your account and drains it? How could you sleep at night? Losing $25,000 worth of BTC would be devastating.

However, for peace of mind, what you can do is simply transfer your Bitcoin to your Ledger Nano device. To do this, you’d have to connect your Nano S or X to Ledger Live (the companion app) and obtain your Ledger’s BTC wallet address (think of crypto wallet addresses as “email addresses” that tell exchanges where to send crypto). Next, you’d open Coinbase, send your BTC to the wallet address, and now your BTC is sitting in an offline wallet as opposed to a vulnerable, exposed hot wallet.

Keep in mind that all transactions are still conducted on the blockchain, but your Ledger stores your Bitcoin’s private keys offline and significantly reduces your chances of being hacked.