Hot vs Cold Wallets
When storing stablecoins or any digital assets, one of the most important decisions you’ll make is whether to use a hot wallet or a cold wallet—or some combination of both. Each type has trade-offs in terms of security, speed, and accessibility. Here, we walk through what these terms mean, how they’re used, and how to decide what’s best for your business.
What is a hot wallet?
A hot wallet is any wallet connected to the internet. That includes browser extensions, mobile apps, web-based wallets, and integrated wallet software in payment platforms.
Because hot wallets are always online, they’re ideal for day-to-day operations like:
- Accepting payments from customers
- Sending payouts or supplier payments
- Managing small-to-medium transaction volumes
- Connecting to dApps or APIs
Hot wallets are fast and convenient, but they come with higher risk. Since they’re connected to the internet, they’re more vulnerable to phishing, malware, or unauthorized access—especially if private keys or seed phrases aren’t stored securely.
What is a cold wallet?
A cold wallet is a wallet that stays offline most of the time. It stores your private keys in a disconnected environment—typically a hardware device, air-gapped machine, or even physical paper.
Cold wallets are best for:
- Long-term storage of stablecoin reserves
- Holding funds not needed for daily operations
- Minimizing attack surfaces for larger balances
- Reducing exposure to software or browser-based threats
Because cold wallets are offline by default, you need to plug in or manually connect them whenever you want to send funds. That makes them much more secure, but also less convenient for regular use.
Which should you use?
For most businesses, the right answer is a combination of both:
- Hot wallet for operational use: Keep just enough funds online to handle daily transactions, payments, and integrations.
- Cold wallet for treasury or reserves: Store larger balances offline where they’re safer from attacks or internal errors. This tiered approach mirrors traditional finance—similar to having a checking account for activity and a savings account for reserves.
Common Pairings
| Use Case | Hot Wallet | Cold Wallet |
|---|---|---|
| Accepting stablecoin payments | ✅ Web or mobile wallet | ❌ Not practical |
| Paying vendors or contractors | ✅ API-integrated wallet | ❌ Too slow for batch payments |
| Storing large reserves | ❌ Too risky to keep online | ✅ Hardware wallet or multisig vault |
| Backing up key access | ❌ Live keys exposed to threats | ✅ Paper or encrypted USB backup |
| Disaster recovery planning | ⚠️ Requires real-time access | ✅ Ideal for long-term protection |
Final thoughts
Hot wallets give you flexibility and real-time access—perfect for daily business needs. Cold wallets offer peace of mind and stronger security for your long-term holdings.
If you’re just starting out, begin with a hot wallet you control (like MetaMask, Rabby, or Trust Wallet) and explore cold storage options as your balance and security needs grow.
Next up:
- Wallets for Teams – Learn how to manage wallets securely across multiple users
- Custody Options – Explore self-custody, third-party custody, and hybrid solutions
- Popular Wallet Brands – Compare wallets by type, platform, and security features