If you own Ethereum, you’ve probably wondered if you’re storing it in the most effective away. You’ve got to weigh up safety vs ease of use, security vs accessibility in what seems to be a constant battle between hot and cold cryptocurrency storage. What does all this mean?

Hot storage, or online storage refers to cryptocurrency that is stored at a location contacted to an online network. A great and common example of this is when you buy cryptocurrency from an exchange and then store it within that exchange, on an exchange based wallet. This is great, because it’s easy to access (you don’t need to worry about losing your private key and can access it anywhere with an internet connection) however, being online does expose you to some risks. Having your assets connected to a network means they can be accessed by bad actors and hackers who could steal your funds. Moreover, in the example of an exchange, what if the exchange goes bust? What happens to your money then.

Cold storage, or offline storage refers to cryptocurrency stored offline in physical wallets, hard drive and even mobile phones. This is great, because you alone are responsible for the security of your cryptocurrency. Assuming you don’t give your wallet away to someone else (and your private key of course), nobody can access those assets, meaning they are essentially hack proof (minus some exceptions).

A drawback to cold storage however is that your assets only exist in one place. Much like a physical wallet, you cash is only stored in one location, so if you lose the wallet, you lose access to the cash. Likewise, if you forget your private key, you’re likely to lose access to the funds stored on the wallet - not ideal really.

This is why the battle between the two is so explosive, both sides have clear advantages and drawbacks, so, it begs the question, how should you store your Ethereum? That’s really up to you. If you are holding and investing for a long time, cold storage is the solution, though you need to remember to be careful and look after your wallet. Short, fast and impulsive investments might be best kept online, especially if you’re trading back to FIAT and withdrawing in a short space of time, this way, you have access to your funds almost instantly, wherever you are and can make careful, tactical investments, though you should remember, having your funds online does present an element of risk. Be careful out there.