BITCOIN Discussion..........

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Tanko

Tanko

Joined
Oct 27, 2021
Messages
35,950
what is the difference between cold and hot private?
Cold is on a separate device disconnected from the intranet (Ledger USB device). Can't be hacked directly since it's disconnected.

Hot wallet (internet connected) is a self-custody (non-custodial) location to store your crypto via software but the important part is I control the private keys, not the software owner.

If you store your money on a hot custodial wallet (Binance, Blockchain.com, etc...), the exchange controls the private keys. Do you trust them not to screw with your crypto????

The downside to non-custodial wallets and/or cold storage... if I lose the USB device (cold) or if I lose my 12 word seed phrase (hot), I could be screwed recovering my crypto.
 

flyingillini

flyingillini

Joined
Jul 25, 2022
Messages
12,170
Cold is on a separate device disconnected from the intranet (Ledger USB device). Can't be hacked directly since it's disconnected.

Hot wallet (internet connected) is a self-custody (non-custodial) location to store your crypto via software but the important part is I control the private keys, not the software owner.

If you store your money on a hot custodial wallet (Binance, Blockchain.com, etc...), the exchange controls the private keys. Do you trust them not to screw with your crypto????

The downside to non-custodial wallets and/or cold storage... if I lose the USB device (cold) or if I lose my 12 word seed phrase (hot), I could be screwed recovering my crypto.
What if the hot wallet company goes out of business or software malfunction? Excuse me for my ignorance. I bought BTC in the inception and sold years ago and never did anything past that. I just don't know how it works now but I do know that you are crazy to keep it on exchanges any kind of substantial amount but even with your explanation, I am confused even when I look it up online. When you keep it in a cold wallet are you basically not touching it?
 

Tanko

Tanko

Joined
Oct 27, 2021
Messages
35,950
What if the hot wallet company goes out of business or software malfunction? Excuse me for my ignorance. I bought BTC in the inception and sold years ago and never did anything past that. I just don't know how it works now but I do know that you are crazy to keep it on exchanges any kind of substantial amount but even with your explanation, I am confused even when I look it up online. When you keep it in a cold wallet are you basically not touching it?
Cold wallet storage is typically for HOLDING.
Hot wallet is for using regularly (or not).

I'm not sure what happens if the software company like Trust Wallet, Edge, or Electrum or one of the hundreds of others you can use goes belly up. I usually pick one with high ratings and has been around a while.

@homie1975 @Ace7550 @rolandcorts
Are all way more knowledgeable than I am.
 

flyingillini

flyingillini

Joined
Jul 25, 2022
Messages
12,170
Any long term BTC investment should be kept in a cold storage wallet. I use a trezor.
Pretty confused by it all, this was all very different when I bought BTC, I just used MTGOX bought and sold with it and made a killing ..haven't done anything in years but I want to buy some and just put it away but not sure exactly where to put it.
 

rolandcorts

rolandcorts

Joined
Feb 10, 2022
Messages
1,022
The distinction between hot/cold is kind of irrelevant. There's exchanges and there are wallets. Funds on an exchange are held by a 3rd party -- if they go bankrupt or get hacked or whatever, you could lose your money just like if you had any funds at FTX. They are holding your funds not you.

Funds on a wallet are held and controlled by you. Some wallets are just apps on your computer or phone, some require the use of a kind of physical USB device. All wallets will generate a password seed phrase for you (usually 12 random words). These words are all you need to recover your funds in the event of your PC blowing up, you lose your USB device, etc. That's why you shouldn't have any worry about whether the wallet software/provider you choose will still operate in the future. Guard the seed phrase carefully. That is all you or anyone else needs to access all the funds in your wallet.

----
Aside:

As for hot vs cold, that's just more how you treat your funds. If you're always sending funds to/from books, you probably have your wallet always online on your computer and logged in. In theory you're more likely to get hacked and lose your funds if you use your wallet like this (i.e. hot = always logged in and connected to the internet). You could still create a software wallet, load it with funds, then log out of it and delete the software. Now it's "cold" and all you need is the seed phrase to access the funds in the future, even via a different wallet software.

The reason I think hot vs cold doesn't really matter is ultimately to access a 'cold wallet' you'll have to load it up and connect it to the internet, so if your device does have some kind of malware or something, you're still vulnerable at that point. Or, in the case of Trezor, if you connect it after years of inactivity and then either don't update the software or DO update the software but by going to the wrong site and downloading a trojan instead, then you might be vulnerable.
 

BigJay

BigJay

Joined
Oct 28, 2021
Messages
9,882
Cold is on a separate device disconnected from the intranet (Ledger USB device). Can't be hacked directly since it's disconnected.

Hot wallet (internet connected) is a self-custody (non-custodial) location to store your crypto via software but the important part is I control the private keys, not the software owner.

If you store your money on a hot custodial wallet (Binance, Blockchain.com, etc...), the exchange controls the private keys. Do you trust them not to screw with your crypto????

The downside to non-custodial wallets and/or cold storage... if I lose the USB device (cold) or if I lose my 12 word seed phrase (hot), I could be screwed recovering my crypto.
Those stories of people losing their computers, or USB, or wherever they have their BTC stored are heartbreaking.

I’m pretty sure when it wasn’t worth crap near its infancy most stored on their own devices.

I remember this story where a guy sued the city to look for his thrown away BTC worth a half billion in a landfill

 
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