The simplest way to describe the difference between a cold wallet and a hot one is this: hot wallets are connected to the internet while cold wallets are not. Most people who hold digital assets have both cold and hot wallets because they are designed for different purposes.
Hot wallets are like checking accounts while cold wallets are similar to savings accounts. People who have digital assets keep a small amount of money in their hot wallets for purchasing stuff. They keep the vast majority of their digital coins in their cold wallet.
Accounts within digital asset exchanges like Poloniex and Bittrex are considered hot wallets because these companies hold your funds in their infrastructure and servers. If a hacker drains Poloniex and you have an account with them, then there’s a good chance you will lose your money because Poloniex in actuality holds your funds.
The safest way to hold your stash is to create a cold wallet. There are multiple ways to get an Ethereum cold wallet address. You can buy hardware wallets like Trezor which is the most secure method but it is a little pricey. The easiest way by FAR is using MyEtherWallet. MyEtherWallet is open source code and can be downloaded for use off-line or on an air-gapped machine if you’re so inclined. It does nothing more than interface with the existing command line interface of Ethereum.
Creating your wallet
1. Go to https://www.myetherwallet.com/ (Bookmark this page to avoid clicking phishing sites in the future)
2. On the Generate Wallet screen, create your password. I recommend using several words as your password.
- MAKE SURE YOU WRITE YOUR PASSWORD DOWN AND KEEP IT SOMEWHERE SAFE.
- It is not recommended that you keep it on your computer.
3. You should see this information. Download your UTC/JSON file and make a duplicate copy for back-up.
4. After that, your private key will be revealed. There will be an option to print your paper wallet, and your private key QR code. You can print multiple copies of it and hide it for safe keeping.
5. Click next to save your address.
6. Unlock your wallet that you just created using the keystore file you just downloaded in order to see your address. You will be prompted to enter your password.
7. Your address will now be displayed, along with some other additional information. This address is what you will use to send ETH or Tokens to this account.
(From: MyEtherWallet Knowledge Base)
Now that you have your own cold wallet, you can now send your Ether from any exchanges to your public address. Always send a small amount first to test if everything is fine.
Things to remember:
- Keystore file
This is the encrypted private key(JSON/UTC) you downloaded earlier. You will need to have your PASSWORD handy to unlock your wallet with the Keystore file. This is the safest way to open your wallet without exposing your private key text online.
- Your address
This is your public address. Ethereum can be sent to you and requested from you at this address.
Tip: You can check the balance of your wallet without opening it on MEW. Just enter your public address on etherscan.io.
- Unencrypted private key
This can open your wallet WITH JUST THE PLAIN TEXT. Never share this with anyone. Do not store it on your computer. If you want to keep it, write it down and keep it in a safe place.
- Paper wallet
This will contain all of your account information including your private key in a printer friendly form.
Always have multiple backups of your private key!
Without it, your ETH and tokens will be lost forever. MyEtherWallet cannot recover your private key or password, access your account, move funds, recover funds, nor reverse transactions. They are not a web wallet. They are a client-side interface that allows you to interact with the Ethereum blockchain. Seriously. Back up your keys.
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