Yes, Bitcoin wallets are divided into two different categories: hot and cold.
Hot wallets are what you’re going to become accustomed to using with Bitcoin Prime and are the wallet type utilized by the majority of the Bitcoin world.
What categorizes a wallet as hot is its connection to the internet. Hot wallets require you to always have an internet connection to use and access. The most common examples of this are the Bitcoin wallets that you can get for your phone.
Hot wallets are simple and convenient. If you want to receive Bitcoin, you send out your wallet ID. If you want to send Bitcoin, you enter the receiver’s wallet ID.
You can transfer money in and out of hot wallets quickly and easily, making it a great choice for day to day trading.
However, hot wallets do come with a handful of downsides. These downsides are typically in the form of security concerns. While it’s relatively unheard of, the constant internet connection requires by hot wallets leaves them open to cyber-attacks.
Most security breaches in the crypto world go through a different avenue (which we’re going to talk about in a second), but it is still a concern for some people.
This concern is what leads people towards cold wallets. Cold wallets are offline, meaning you can access the coins on the device without an internet connection.
This makes transferring coins to and from the device a pain, but day to day transactions aren’t what cold wallets are designed for.
This wallet type is popular with long term investors. These are the type of people to drop five or even six digits on Bitcoin and keep it for years. They load up a cold wallet with their coins, put it in a safety deposit box, and leave it.
This isn’t the type of trading that you’re going to be doing at Bitcoin Prime, but it can be helpful to be aware of its existence.