Today, there are two main types of wallets – with hot and cold storage, each of them has its pros and cons.
The Lithuanian crypto license allows wallets to work completely legally because most users are used to confiding only trusted companies that operate within the law.
Features of crypto wallets with hot and cold storage
Every person connected with the world of cryptocurrencies has come across crypto wallets. It is a convenient and helpful tool that allows you to safely store large amounts of currency and perform various financial transactions, including international ones.
Today, there are two main types of wallets – with hot and cold storage, each of them has its pros and cons. The Lithuanian crypto license allows wallets to work completely legally because most users are used to confiding only trusted companies that operate within the law.
- Easy to use;
- A large number of functions;
- Support a large number of currencies;
- You can log in from any appliance;
- Fast transactions.
- Poor protection;
- Easily hacked.
They are commonly referred to as those with access to the Internet. There are 2 main types of hot wallets – software and web. In the first case, you install special software on your computer or mobile phone. Now you can log into the system at any convenient time and perform various transactions.
Web tools exist on the Internet. Users go through registration, and you can safely use all the advantages of such a tool. It is very similar to the standard e-wallets that we use with fiat currencies.
Hot storage wallets are rarely used to store large amounts of money. However, it can be pretty handy to make a financial settlement in a store using crypto assets.
- Perfect protection;
- Suitable for storing large amounts of currencies.
- Difficult to use.
As already mentioned, hot storages are entirely unsuitable for storing huge amounts of currency because they are straightforward to hack. In this case, a wallet with cold storage comes to the rescue. There are several such varieties at the moment but only hardware is popular. It is because it is compact, inexpensive, and perfectly protects assets.
Cold wallets do not need a constant Internet connection. They are a USB flash drive where the software is stored, which is necessary for the existence and protection of cryptocurrencies. Such a carrier costs an average of 150 USD, but the cost depends on how much currency you plan to store and how many types of crypto assets you are interested in.
If you need to perform some action, such as making a financial transfer, you connect the media to your computer and the Internet, complete the task, and then disconnect it again. The advantage is that it becomes challenging to steal money even when connected to the Internet, thanks to the protection based on two private keys or a signature.
Of course, using a cold tool every day is highly inconvenient, but it was created to store assets, not active use. It does a great job with this task. Even many cryptocurrency exchanges use such tools to keep their reserves.
What to look for when choosing?
When choosing a cryptocurrency wallet, you need to consider the following points:
- How often do you plan to use it;
- What cryptocurrencies are you interested in and how much money do you plan to store on one medium;
How much are you willing to spend;
- What device (computer or smartphone) will you use?
So, if you want to use the wallet every day and use your mobile phone, you can choose any wallet with hot storage. In addition, registration on such platforms is free.
But, if you need a cache where you will store large amounts of assets, then it is better to choose hardware that will reliably protect your assets.
In fairness, it should be noted that now developers are trying to improve wallets, make hot ones more secure, and cold ones more convenient to use. It is assumed that there will be an alternative option shortly with all the parties’ advantages by analogy with hybrid exchanges.
How legal is it to use crypto wallets?
Lithuania is one of the countries that welcome cryptocurrencies and has created convenient and understandable regulatory conditions. The crypto wallet must obtain the appropriate license, and then any user will use it within the law.
In addition, currency exchange is tax-free, and financial transfers are subject to VAT, as for fiat currencies. As for NFTs, they are equated to securities and operate by the law. The Lithuanian authorities have tried to do everything to make the regulation of cryptocurrencies as simple as possible.
So, crypto enthusiasts have long appreciated the benefits of using wallets. It is an excellent tool to keep your assets more secure, use currencies to earn money, and perform other everyday tasks, such as buying movie tickets.
Wallets are better for the daily use of cryptocurrencies with hot storage but are hungry for the safety of large volumes of assets. Each wallet that operates on the territory of Lithuania must obtain a license and only after that work legally.