Breaking the Ice: Should you switch over to a Warm Wallet?

Warm Wallet

If there is one enduring theme when it comes to technology, that is its constant evolution – and crypto wallets are no exception. It has been over a decade since the first hot and cold wallets were introduced, and it’s about time that a hybrid hot-cold wallet (or warm wallet) is available to users.

Since 2016, the number of crypto asset users has ballooned from 5 million to over 516 million in 2023[1]. This begs the question, what wallet type is the most popular amongst this growing pool of users and how does it fare in today’s landscape marked by the need for both performance and security?

Warm wallets: A useability ‘want’ that is also a security ‘need’Warm wallets: A useability ‘want’ that is also a security ‘need’

Coinbase Wallet, MetaMask, and Trust were the only crypto wallets in the United States to reach more than two million downloads each in 2022[2]. Showcasing the preference for hot wallets and the convenience that comes with usage. Security concerns, however, have grown in tandem with the increase in stolen funds across these popular platforms. In 2022, a MetaMask exploit resulted in over US $10.5 million worth[3] of ether being stolen from their wallets.

Does this then mean that cold wallet proponents are safe from cyberattacks? Unfortunately, the answer is no. Just this month, hardware wallet Ledger revealed that hackers had suffered an attack, with $484,000 worth of digital currencies stolen. The weak link? A phishing attack that injected malicious code into the GitHub library for Connect Kit, a javascript library widely used by the wallet platform. In addition, Ledger is not the only platform using Connect Kit.

This then leaves us with the question: What is the solution if neither option is truly effective against security risks? A warm wallet, fortified by proactive and intelligent security.

If you’re interested in diving further into the advantages and disadvantages of hot and cold wallets, I detail the advantages and disadvantages of hot and cold wallets in my previous article.

The inevitable transition to warm wallets: should you consider one?

In short, if you are looking for a combination of useability and dynamic security, a warm wallet is perfect for you.

This ideal blend that represents the best of both worlds can greatly benefit a range of users including:

  1. Everyday casual users Convenience for daily transactions with security, without the need to invest too much time and effort into ensuring your digital assets are protected
  2. Investors Securely store large volumes of crypto for long-term holding and trading. A sobering reminder for hardcore crypto investors rang loud and clear this year when Mark Cuban himself was a victim of crypto theft[5]. Losing $870,000 in one fell swoop.
  3. Avid crypto traders Convenience and quick accessibility if paramount when making frequent transactions, warm wallets provide this with the added benefit of peace of mind with greater security.
  4. Businesses and enterprises All the reasons listed above hold true, perhaps even more so for businesses and enterprises that deal with crypto trading given the responsibility to the corporation, shareholders, and investors. Ensuring high security standards is an essential element of corporate governance and responsibility in the handling of the company’s funds.

Ultimately, regardless of market movements and detractors, the cryptocurrency industry continues to attract new interest every single day. The more it expands, the more it becomes a target for hackers – especially due to the high value of transactions and its digital nature. Crypto traders are increasingly recognizing that security, and not just static security, is a necessary feature of any wallet platform. I eagerly await the boom of the warm wallet generation in the near future, as crypto users learn to take security more seriously.

[1] Number of identity-verified cryptoasset users from 2016 to June. Retrieved from: 2023 https://www.statista.com/statistics/1202503/global-cryptocurrency-user-base/
[2] Biggest wallets for cryptocurrency storage in the United States from 1st quarter of 2015 up until 2nd quarter of 2023, by number of downloads. Retrieved from: https://www.statista.com/statistics/1366918/most-popular-crypto-wallets-in-usa/
[3] This MetaMask exploit has stolen $10M ether from OG crypto users
Retrieved from: https://protos.com/this-metamask-exploit-has-stolen-10m-ether-from-og-crypto-users/
[4] Are Crypto Cold Wallets Safe? Ledger Cites “Phishing Attack” behind the Hack
https://www.financemagnates.com/cryptocurrency/news/are-crypto-cold-wallets-safe-ledger-cites-phishing-attack-behind-the-hack/
[5] Mark Cuban loses $870,000 in crypto hack, billionaire blames bad version of MetaMask software.
Retrieved from: https://fortune.com/crypto/2023/09/18/mark-cuban-loses-870000-in-crypto-hack-billionaire-blames-bad-version-of-metamask-software/

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