At I Bet On Crypto, our Editor is reviewing hardware wallets (sometimes called cold wallets or cold storage), so you can get a suitable and secure device to protect your crypto. But if you are a complete beginner to cryptocurrency, let us outline what hardware wallets are and what the main differences are that matter to you.
After using the majority of cold wallets for over 7 years, our team is ready to share our expertise with you. We hope you’d find this cold wallet review useful.
First things first: what a “crypto wallet” actually is
A crypto wallet doesn’t hold your coins like a leather wallet holds cash. Your crypto “lives” on the blockchain. The wallet holds the keys that prove you’re allowed to move it.
- Public address = like your IBAN (safe to share; people can send you crypto).
- Private key / seed phrase = like the master password to your money (never share).
If someone gets your private key (or seed phrase), they can take the funds. That’s why wallet type matters.
What are hardware wallets?
A hardware wallet is a small physical device (often USB-like) designed to keep your private keys stored securely offline and sign transactions without exposing the keys to the internet.
In beginner terms:
- Your laptop/phone can be hacked.
- A hardware wallet is built so your private key stays inside the device, even when you connect it to approve a transaction.
Hot wallet vs cold wallet vs hardware wallet (the real difference)
Hot wallet (online wallet)
A hot wallet is connected to the internet (or runs on an internet-connected device like your phone/computer). It’s made for convenience and frequent use.
Typical examples
- Mobile wallets (apps)
- Browser extension wallets
- Desktop wallets
Best for
- Daily spending
- Smaller balances
- DeFi/NFT activity (if you choose to do that)
Cold wallet (offline storage)
A cold wallet means your private keys are stored offline, so they’re not constantly exposed to online threats.
Typical examples
- Hardware wallets (most common)
- Paper wallets (less common; easy to mess up)
- Offline/air-gapped setups (advanced)
Best for
- Long-term holding
- Larger amounts you don’t need every day
Hardware wallet (a type of cold wallet)
Most of the time, a hardware wallet is the practical “cold wallet” beginners mean: a purpose-built device that keeps keys isolated and signs transactions safely.
Quick cheat sheet
- Hot = connected for everyday use (convenient, higher exposure).
- Cold = offline storage (safer, less convenient).
- Hardware = a device that usually implements cold storage in a beginner-friendly way.
Important nuance: “Cold wallet” is the category (offline). “Hardware wallet” is a product type (a device) that typically belongs to that category.
How a hardware wallet works (step-by-step)
- You set it up once → it generates your private keys and a seed phrase (backup words).
- You install a companion app (or connect to a wallet app).
- When you send crypto, the transaction is prepared on your computer/phone…
- …but the hardware wallet signs the transaction on the device, so the private key isn’t exposed.
- The signed transaction is broadcast to the network.
Pros and cons (beginner reality)
Hardware wallet – pros
- Strong protection against many online attacks (because keys stay isolated).
- Great for long-term holdings and “sleep-well” storage.
Hardware wallet – cons
- Costs money.
- You must handle backups properly (seed phrase).
- You can lose the device (but funds can be recovered with the seed phrase if stored safely).
Hot wallet – pros
- Very convenient.
- Best UX for frequent transactions.
Hot wallet – cons
- More exposed to malware/phishing/device compromise (because it’s on an online device).
Which wallet should a beginner use?
A simple, safe setup many people use:
- Hot wallet: keep a small “spending” amount for daily use.
- Cold/hardware wallet: keep your main savings (the amount you’d be upset to lose).
This matches how “wallets” work in real life: pocket cash vs money in a safer place.
Beginner safety rules (don’t skip these)
- Never share your seed phrase with anyone (no “support agent,” no website, nobody).
- Write the seed phrase down and store it safely (not in a public cloud doc).
- Do a small test transfer first before moving a large amount.
- Beware phishing: always double-check URLs and app downloads.
Which Hardware Wallet To Buy
Now, we have prepared a set of useful guides to help you decide just that – which hardware wallet to buy that suits your needs.
First of all, our Editor composed an up-to-date comparison of the 6 Best Hardware Wallets here, so start with that.
And then, should you wish to dig deeper into a particular wallet, head to our dedicated Hardware Wallets tab in our reviews and guides, to browse Ledger, Trezor, Keystone, Tangem and more reviews.
FAQ on what are hardware wallets
Is a hardware wallet the same as a cold wallet?
Not exactly, but it’s easy to mix things up. A cold wallet is any offline method of storing keys, while a hardware wallet is a specific device that usually provides cold storage.
Can I keep crypto on an exchange instead?
That’s usually a custodial setup (they control the keys). Wallets are about who holds the keys – you or a third party.
If the hardware wallet doesn’t “store coins,” what does it store?
It stores and protects your private keys, which control access to funds on the blockchain.
Recommended Reading on hardware wallets:
Our expert comparison of the popular crypto wallets is here.
We’ve also compared the 6 best hardware wallets here.
The leading Ledger and Trezor hardware wallets are compared here.
We’ve explained the differences in the software part of the leading cold wallets here.
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