Hot wallets are “hot” because they are always connected to the internet. Being virtual means that your seed phrases and private keys are stored online and in your wallet’s browser or application, making them more susceptible to cybersecurity threats, where cold wallets use physical hardware like secure elements to protect this information. Hot wallets refer to virtual wallets that are online and facilitate the sending of cryptocurrencies to other users or exchanges. Hardware wallets are almost always the safest solution against security threats. Each transaction requires your key, the physical device, to respond to the transaction, and your device has a pin for an additional layer of safety.
While the software counterpart for your cold wallet acts as a safe, still allowing your Bitcoin to exist on the blockchain and be staked, your physical device acts as a key for this safe. Hardware wallets, or cold wallets, store your seed phrase and private keys in a secure physical device and protect you against cyber attacks by air gaping your private key from the internet.
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