A cryptocurrency wallet is a tool that allows users to store, send, and receive digital assets. These wallets are generally classified into two main types: hot wallets and cold wallets. The key difference between them lies in their connection to the internet.

Hot wallets are always online and connected to the internet. They include mobile apps, desktop software, and web-based wallets provided by exchanges. Their main advantage is convenience: users can access their funds quickly, making them suitable for active traders or frequent transactions. However, because they are online, hot wallets are more vulnerable to hacking, phishing, and malware attacks. Strong passwords, two-factor authentication, and security updates are essential when using hot wallets.

Cold wallets, on the other hand, are offline storage solutions. They include hardware wallets, paper wallets, or even devices not connected to the internet. Cold wallets provide a higher level of security since they are not directly exposed to cyber threats. This makes them ideal for storing large amounts of cryptocurrency for long periods. The downside is that they are less convenient for frequent transactions, as accessing funds requires extra steps.

In summary, hot wallets offer speed and accessibility, while cold wallets prioritise safety. Many investors use both: hot wallets for daily use and cold wallets for long-term storage.