So, sometimes think I know a good amount abt crypto world and then get so confused abt the logic some basic aspects, like wallets. So please ignore my ignorance,

I tried to research some of this but couldn’t find a clear answer. Ifinally have enough funds to where the idea of storing it all in an exchange makes me wary so bought a ledger so could transfer it all. But then saw a post about how ledger is now considered a hot wallet. So, how is this different than any other hot wallet and is it still a safe place to store large amounts of coins?

Also while l’m here, I always see people talk about how you can connect hot wallets to it and still use them, but I’m confused how you can connect wallets like meta or phantom to your cold (or guess another hot if ledger is a hot wallet now) and it’s still safer than using those wallets by themselves. Is it just like a gateway for transactions? How does that protect your funds more than storing them in the browser/ app wallets? Thanks!

  • artica_james@alien.topBEnglish
    1·
    10 months ago

    A Ledger isn’t considered a hot wallet although there were recent concerns, and rightly so, about an optional feature they were releasing called “Ledger Recover” which if the user Opt’s-In to will backup and encrypt your seed phrase, splitting it into 3 fragments and storing it with 3 backup providers. The concerns around this were how Ledger had marketed that the seed phrase generated and stored on the secure element could never be exposed online, of which such backup mechanism contradicts. Can learn more about Ledger Recover here: https://www.ledger.com/academy/what-is-ledger-recover

    With that mentioned, I personally believe Ledger is still a far safer tool to protect your private keys than any hot wallet, as long as don’t opt in to the recovery service.

    The way hardware wallets work is that they generate and store your private keys offline, which is what makes them known as cold storage. A common misunderstanding is that your crypto is stored directly in wallets, this isn’t the case, your crypto is held on the blockchain, but your private keys that are paramount to accessing your assets on the blockchain are stored in the wallet, whether that be hot or cold.

    Wallets such as Phantom/Solflare including Ledger Live simply act as a user interface to access the blockchain.

    A hardware wallet connected to Phantom etc still keeps your private keys offline (as long as you follow the correct procedures to “connect/add” the hardware wallet - you should never “import” your hardware wallet into Phantom as this would then make it a hot wallet as keys would be exposed therefore compromising the security of it.)

    Using an exchange to store/stake your assets on isn’t recommended for the simple yet important reason that they have custody of your private keys, meaning they have full control over your crypto. FTX is a perfect but very unfortunate example of why this is a bad idea amongst many other reasons… Exchanges also have been known to pause/suspend withdrawals etc.