Topic: Hot wallets are not the same as hardware wallets. (Read 165 times)

Exactly so, and in addition, funds in a hot wallet can easily be engaged for a quick funding during trade without requiring key phrases or any serious details, since it's on the exchange and the user has logged in originally. Hot wallets also get easily affected if anything happens like a new policy or hack that is directed at the exchange or individual.

While cold wallets could easily get stored on hard drives, flash drives and on many compatible devices that will require key phrases before having access, it makes it safest for long term HODLing, DCAing and large investment portfolio investors.

As a business, you will need both, hot and cold wallets.

You can see what centralized exchanges do. Customers make deposits to their accounts, in credited public receiving addresses given by the exchange. Exchange, later will move customer money to their cold wallets as parts of their exchange vault/ treasury. They don't keep all money in their cold wallets but will move some of it to their hot wallets that will be used to proceed user withdrawals.

The decision to actually have a hot wallet instead of a cold wallet or hardware wallet to keep funds for business purposes is something I would say is a matter of choice. I think even the use of bitcoin hardware wallet which is better for use due to security reasons would still be flexible to use still. For some one not willing to send out coins more frequently they can easily use a hardware wallet and then monitor transactions status from a watch only wallet. As for the issue of sending bitcoin more frequently I don’t still think coins been stored using hardware wallets can still be difficult to send. Everything can be done on a watch only wallet with the signing the only thing needed to be done by the hardware wallet which holds the private key

To generate receiving addresses to accept crypto you only need a watch-only wallet, which in this case doesn't need to be connected to a hardware wallet but could use the master public key of a hardware wallet. I wouldn't call a watch-only wallet to be hot because it doesn't contain any private keys and you therefore can't send from it. Being exposed as an accepting wallet such a watch-only wallet is probably a quite safe solution (see the requirements of your payment processor software).

If you only need to send rarely from such a wallet, this can be done in a more safe setup with another wallet that has the correspondent private keys for the receiving addresses of the above mentioned watch-only wallet.

So, taking your initial post by the word, for accepting crypto you neither need a hot wallet (online and able to send crypto), nor a wallet connected to a hardware wallet as signing device.

It's not easy to give meaningful advise when not all purposes of your desired wallet are known. You might want to go into more detail what exactly you need to do with that "accepting" wallet and probably enumerate all use cases.

my personal opinion, if it is a business, then the most efficient thing is to use a hot wallet, because in business transactions will be carried out more frequently, and it is not practical when you have to use a hardware wallet to send or receive crypto. however, businesses also need to consider using a hardware wallet to store some of their crypto, especially for crypto that they plan to hold long term, it is much safer to store it in a hardware wallet. so for your own business, using hot wallets and hardware wallets is highly recommended.

This is not about making an argument, but instead in understanding the reason why its a safe practice not to make use of a custodial wallet for such purpose, because if anything happens to the exchange in which you're using, all your asset are gone and cannot be recovered, also we need to understand the reason for privacy, if we don't want to be tracked or our information's revealed with the use of centralized exchange for such purpose.

If you ask me so I agree with you. Your friend advice to use hardware wallet for accepting crypto payments in your business is misguided. Hardware wallets are ideal for long term storage and security not for frequent transactions. They can be cumbersome and slow making them impractical for daily business use. Hot wallets on the other hand are perfect for day to day transactions  testnets airdrops and connecting to decentralized exchanges like Uniswap. It is common sense approach to use hot wallets for everyday activities and transfer valuable assets to hardware wallet for safekeeping. Your friend overemphasis on security is understandable but it is important to consider practicalities of running business. You are right to question this advice and consider more balanced approach to managing your crypto assets.

You can make use of your hardware wallet in receiving payment for your business and other transactions you may so desires, they are not the same as hot wallets, i will not recommend you with hot wallet for use, instead, make use of your hard wallet, as in other case, you may consider the use of electrum wallet as well or set up a lightning network for your business and make use of it for your payments.

Hot wallets are the wallet that are connected to the internet while cold wallets are those wallets that aren't connected to internet. In that sense, hardware wallets fall into the category of cold wallets and those are totally different from hot wallets.

Let's say you have a wallet at an exchange, and you can access that wallet with internet connection, then that wallet is an hot wallet, e.g Binance's wallet is the best example of hot wallet. The wallets that you get at other exchange's are also considered as hot wallets, even your own personal wallet which's connected to internet is considered as a hot wallet.

And at the same time, you have a hardware wallet or any other device that hasn't been connected to internet could be considered as cold wallet. Yes, it's much easy to make transactions from hot wallets but such wallets aren't safe at all. Any device that's connected to internet isn't safe, and can be compromised by hackers.

If you want best security then you should go with cold wallet or hardware based cold wallet but if you don't give priority to security and want transactions to be done on daily basis then you can go with a hot wallet. However, I warn you that with hot wallet your assets are at risk and if your system gets infected with any malware or virus then hackers can easily transfer your funds without your permission.

The advanced security measures and the extra step of connecting to the Internet that hardware wallets require make hot wallets the preferred and faster option for regular trading and daily transactions. Although hot wallets are not the safest option, unlike hardware wallets, which are specially designed for long-term offline storage and are less vulnerable to hacking, I agree with using both types of wallets.

You can rely on your hot wallet for your business, daily activities, and regular transactions. After that, you can transfer your assets to your cold wallet, which is not connected to the Internet. I always recommend creating a wallet that you have full control over and can manage yourself without the involvement of third parties, such as CEX platform wallets. Always prioritize the security of your wallet against potential hacks, your seed phrases, and the Dex and airdrop platforms that you will connect your wallet to because your wallet can be easily drained if you don't prioritize its security.

The title of your thread is misleading, that is not what your friend told you. I wonder how you came up with such a title.

You both are correct in your own different ways. In terms of security of your fund, your friend is very much correct. You will be pained to discover that you wake up one day to discover that your business funds in hot wallet are all gone.

In the other hand, when using a hardware wallet, it is only your customers sending coins to it and not you sending back to them. So, hardware wallet is appropriate. The only disadvantage might be if you want to move your funds very fast due to volatility.

There's nothing wrong in using hardware Wallet for your daily transaction. If you have it and feel like using it for your transaction, then you can use it instead. But for me, I only use my hardware wallet for long term storage purpose and large amounts. I prefer using my hot wallets for daily transaction. Though I don't use crypto payment as an option for my business.
Also, hot wallets can be used for airdrops and other little or even large amounts but you have to be security cautious and avoid linking your wallets to ay airdrop sites. Or clicking malicious links that might phish into your wallets. Your friend is right but it depends on you choice of wallet.

If you do daily transactions, but not too often, it's good to use hardware wallets. If you do one or two transactions daily, go with hardware wallets if you have it. Hot wallet is more risky and it should never be a wallet type to store all or main of your capital.

Software wallets can be non custodial or custodial and the enough recommendation need both, open source and non custodial.

Your friend must learn to know how to backup a wallet and recovery it.
Wallets. Backup your seed phrase, extended phrase, derivation path.
How to back up a seed phrase

When it comes to business related, I would assume that transactions will be done frequently, which means you will both send and receive. Business wise, I will advice Hot wallets ( the non custodial type). My reason is because: I know that the funds won't stay there for a very long time, so it's ideal to save it in a place where I can easily move it out. But if the amount happens to be very huge, I will advice that you use the Hardware form and endure the time taking to move funds out. It's better to waste your time trying to move your funds, than to put it in a place vulnerable to attacks.

Aside that, it's very important that we understand the difference, so as not to involve yourself in unnecessary arguments.

A hardware wallet are also known as cold wallet is basically are an offline wallets that are connected to external applications only. They are used in storing private keys which allows a user to access his/her funds. From the ones I have seen, they are usually in forms of a USB. I keep advising that Hardware wallets should be considered for long term hodling of Bitcoin. I think we can only classify this types of wallets as non-custodial. Some can be time wasting.

While Software wallets are also known as Hot wallets are usually connected to the internet and come in the form of desktop, web and mobile wallets. I think custodial and non-custodial falls under this type of Wallet, as we can have a software wallet that can either be a custodial or non-custodial.

I personally use the software wallets (non-custodial in particular) as they are less expensive than your hardware wallets.

So I think you are right by stating that -

But you should choose the non-custodial to be on a safer side.

Who argued that hot wallets are the same as hardware wallets? We all know their differences.

Transactions should not be that difficult on hardware wallets like Trezor which is not an airgapped hardware wallet. On airgapped hardware wallet, you need to send BPST and signed transaction which can make it not easy for you, but that is easy for me for daily transactions because I am not an exchange that deals with many people that wants to withdraw but just only me.

Your friend is very correct about what he told you.

I disagree that accepting crypto to your hardware wallet while running a business is a good practice, this is the advice that my long time crypto investor friend was telling me when I told him that I want to start accepting crypto payments in my business, we argued for a while and I got tired.

Can someone tell how how wrong this is? Because I do have both hardware wallet and I have used Hot Wallet few years already, it is not easy to make fast transactions using a hardware wallet.

And my friend seem so focused on the safety, I told him that long term holding is why hardware wallets are good choice not day to day transactions. 

Hot wallets are good for day to day transactions, activities that involve solving tasks to make more tokens like testnets and airdrops, connecting to uniswap and other Dex for purchases, in the end you move your valuable assets into a hardware wallet for a long term safekeeping.