Hot vs Cold Wallets

Hot wallets

Mobile apps, desktop apps and browser extensions keep keys on a device that browses the web. They are fast, convenient and necessary for interacting with applications — and they share the fate of the device they live on.

• Best for small, active balances.
• Exposed to device malware and malicious websites.
• Fine for daily use if you keep amounts limited.

Cold storage and hardware wallets

A hardware wallet keeps the private key inside a dedicated device. Transactions are built on your computer or phone, sent to the device, displayed on its own screen, and signed there. The key never leaves, so malware on the computer cannot read it.

The protection depends on you reading the device screen. If you approve a transaction that sends funds to an attacker's address, the hardware wallet will sign it correctly and obediently.

1. Buy directly from the manufacturer or an authorized reseller, never secondhand or from a marketplace listing.
2. Initialize the device yourself and generate a new recovery phrase on the device.
3. Reject any device that arrives with a pre-printed recovery phrase — that is a known scam.
4. Verify addresses and amounts on the device screen for every transaction.
5. Keep firmware current using the manufacturer's official application.

A hardware wallet protects the key, not your judgment. Read every prompt on the device itself.

Choosing a split that fits

• Amounts you would be upset to lose belong in cold storage.
• Amounts you use weekly belong in a hot wallet.
• Keep the two separate rather than moving everything back and forth.
• Test the recovery process before you rely on it.

Sources

• Ethereum documentation — Wallets
• CISA — Multi-factor authentication