Explain the Difference between ‘Hot Wallet’ and ‘Cold Wallet’ Custody Solutions.
A 'hot wallet' is a cryptocurrency wallet connected to the internet, allowing for quick, easy access to funds for trading or transfers. While convenient, it carries a higher risk of hacking.
A 'cold wallet' is an offline storage solution (e.g. a hardware device or paper wallet), making it highly secure against online threats but less accessible for immediate transactions. Institutions typically use a combination, with the majority of assets in cold storage.
Glossar
Cryptocurrency Wallet
Custody ⎊ A cryptocurrency wallet, within the context of derivatives trading and financial engineering, fundamentally represents a secure mechanism for managing private keys, thereby enabling control over digital assets.
Wallet
Custody ⎊ This refers to the secure management of the private keys that control access to the underlying cryptographic assets held by the user or entity.