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What is a hot and cold wallet?

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A hot and cold wallet is a hardware wallet that can store digital currencies. It

What is a hot and cold wallet?

A hot and cold wallet is a hardware wallet that can store digital currencies. It provides a secure and convenient environment for use. When using it, do not touch it or use it as a place to store mnemonic phrases and private keys. A cold storage wallet distributes funds to various locations to ensure their safety and decentralization.

With advancements in encryption technology and continuous innovation in blockchain, we have seen more and more financial products and services entering the hands of users. However, due to the lack of a secure and reliable asset management solution in the market, some users are unable to have full control over their digital assets. For example, cryptocurrency exchanges or other types of users need to worry about theft.

Cold wallet and hot wallet

In the Bitcoin Lightning Network, users store funds in cold wallets and hot wallets. When Bitcoin is being traded, there are two security issues: first, how to confirm if the transaction is correct; the second issue is why we need to use a network that is not connected to the internet. Without solving these problems, transactions cannot be carried out. Both of these situations can potentially result in asset loss, such as when Bitcoin prices drop to historical lows, ordinary individuals may choose offline payments due to concerns about losing their private keys. (Ambcrypto)

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