Skip to main content

This post may contain affiliate links which may compensate us based on your interaction. Please read the disclosures for more information.

Are you new to Bitcoin and you recently purchased some? If so, I know you’re excited and happy about the bright future that Bitcoin has to offer. But like your real money, you have to be mindful of where you put it and how you spend it. Here are the different Bitcoin wallet types, how to safely store your new digital wealth and where to spend it.

There are two types of Bitcoin wallets, Hot and Cold, and I’ll give you a quick 50,000 foot overview of them.

Hot Wallets

Hot wallets are generally defined as wallets that exist on exchanges and are used primarily over the Internet. If you buy your Bitcoin from places like Coinbase or Bitstamp and leave them there, your wallet is a “web-based wallet.” Hot wallets offer users easy use that cold wallets do not. They are usually used in conjunction with apps that installed on your smart phone or on your PC. Think of your hot wallet the way you do a checking account at a bank. Just like you have to make certain that your checks and your ATM cards are secure at all times because people can steal them and make unauthorized purchases, Hot Wallets are exactly the same.




The private keys to your Bitcoin account (which are similar to your Account and Routing numbers) are not controlled by you. They reside with the exchange that houses your wallet. If you lose your smart phone or your PC or the exchange gets hacked, you can lose all of your investment. As a good rule of thumb, you should never keep large amounts of Bitcoin in a Hot Wallet.

Best practice is to never keep more than $100 USD in a hot wallet, unless I know you’ll be making a purchase more than that.

Cold Wallets

The vast majority of seasoned Bitcoin holders and traders keep their investments in a Cold Wallet. Cold wallets do not exists on the Internet and are controlled by you with private keys. Think of a cold wallet like a savings account at a bank. Using a banking scenario, savings accounts that are not linked to your debit card are a secure way of storing your funds. Cold wallets are the same way.

There are different types of cold wallets, which are paper wallets and hardware wallets. Paper wallets are wallets that you print and have both private and public keys displayed. Cold paper wallets rarely interact with the Internet, unless you are transferring funds to make a payment. There are lots of different ways to create Cold wallets. Here is a how to make your own.

The other type of cold wallets are hardware wallets, like a Ledger Wallet. They plug into your smartphone or PC via USB and have a separate interface that allow you conduct transactions. This method of Bitcoin storage is not quite as easy as a hot wallet but it is far more secure. This video explains how to purchase your own hardware wallet and how to use them.

When using Bitcoin, you are solely responsibility for securing funds. Pick a wallet or a combination of wallets that work for you. For more information, visit http://www.investnoir.com.

Leave a Reply