Hot storage and cold storage are two commonly used terms in the field of cryptocurrency and digital asset management.
Hot storage refers to storing cryptocurrencies in a wallet that is connected to the internet and is easily accessible for transactions. This type of storage is convenient for regular trading and transactions but is more susceptible to hacking and theft due to its online nature.
Cold storage, on the other hand, refers to storing cryptocurrencies in a wallet that is not connected to the internet, typically on a physical device or paper wallet. This type of storage is more secure as it is not vulnerable to online attacks, making it ideal for long-term storage of large amounts of cryptocurrencies.
Cold storage works by generating and storing the private keys of the cryptocurrencies offline, making it impossible for hackers to gain access to them through online means. To access the funds stored in cold storage, the private keys need to be imported into a hot wallet for transactions.
Reference:
Nakamoto, S. (2008). Bitcoin: A Peer-to-Peer Electronic Cash System. Retrieved from https://bitcoin.org/bitcoin.pdf
Differentiate hot and cold storage. How does cold storage work? with references apa format
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