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Where is crypto actually stored hot wallets cold wallets exchanges what's the difference in this video I'm going to make it very easy for you to understand so crypto is always stored on the blockchain it's not stored on some computer it's not stored in the cloud it's not even stored on a hardwareWallet it's always on the blockchain what is stored on those devices is the keys that control the crypto and if you have your crypto on an exchange they have the key to control the crypto and if you have your crypto on a self-custody wallet well you have theKeys to control the crypto and I like to compare it to a mailbox actually a see-through mailbox that everyone can see what's going on just like we can see on a transparent public blockchain but just because we could all see what's inside of the mailbox doesn't mean weActually have access to it if you have your crypto on an exchange really you have the keys on the exchange they have access to it and if you have crypto or really the keys on your own self-custody wallet you have access to the crypto so really we're just moving around keys forExample even if you have a hardware wallet that you generated a seed phrase with and then that Hardware while it breaks and then you take that seed phrase and restore it on a hot wallet you'd think you transferred crypto from a cold wallet to a hot wallet but reallyNothing changed the crypto is in the same spot on the blockchain what really happened is you transferred the keys from a more secure device to a less secure device so why is there risk keeping your crypto or really your keys on an exchange well when we use andExchange the mailbox is no longer transparent we actually can see what's inside we have to trust the exchange when they tell us that the crypto is actually there but let's say we could see what's inside of the mailbox or we could see that our funds were actuallyThere well if we went to access them we can on our own we have to ask permission from The Exchange because we remember they are the ones that hold the key to the mailbox they are the ones that hold the key to the crypto so when we holdOur crypto on a self-custody wallet whether it's a hot wallet or a cold wallet we know the funds are there it is a see-through mailbox again and if we want to access those funds we can do so at any time so what's the difference between a hot wallet and a cold walletThe main difference is the way we secure those keys with a hot wallet you've probably heard that it is less secure the reason is because when we generate keys for a hot wallet it is displayed on a device connected to the internet so if your computer is compromised the hackerWill already have access to your seed phrase but for the most part that's not the case usually when we create hot wallets or devices whether it's a computer or the phone it's usually fine but then moving forward the seed phrase for our hot wallets is actually storedIn the wallets browser so if in the future your computer becomes compromised or you download malware on your phone or computer a remote hacker may have access to your crypto and also if someone is able to gain remote access to your computer or your computer is compromisedTransactions can be made on your phone or your computer and the transaction will be signed on the app basically with a hot wallet your seed phrase is exposed to the internet and hot wallets are good I'm not hating on them I use them myself and actually a lot of people in theSpace use hot wallets they are seamless they are very convenient but usually when people use hot wallets it is recommended to not keep all of their funds on a hot wallet as you can see it is exposed to the internet making your crypto vulnerable or actually to beCorrect making the keys to your crypto more vulnerable now when it comes to a cold wallet why is it more secure well with a cold while we generate the seed phrase offline on a device that is not directly connected to the internet right off the bat this makes our seed phraseMore secure and then moving forward the seed phrase is not stored on the wallet's browser the seed phrase is offline so even if a hacker gains remote access to our phone or our computer they won't be able to access our seed phrase and if our device is fully compromisedAnd a hacker gets right into our computer and starts making transactions well they won't be able to because the final transaction must be signed on the physical device so if you have a remote hacker gain access to your hot wallet they can potentially make transactions just through the internet but if theyGain access to your computer but your funds are in a hardware wallet they would need the physical device itself to sign a transaction this is why Hardware wallets are more secure than hot wallets and when using using Hardware wallets you may notice you connect them to appsSuch as metamask when doing so this does not make your Hardware wallet become a hot wallet the seed phrase is still secure on the hardware wallet we are only using an app such as metamask as an interface so let's say we connect our ledger to metamask and our computerBecomes compromised there is no seed phrase for a ledger that is stored on that metamask also if someone gains Direct Control of our computer and starts making transactions on the interface for metamask well they'll have to sign the final transaction on the hardware wall itself which they don'tHave so whenever you see a hardware wallet being used with a hot wallet really the hot wallet is just being used as an interface crypto is always stored on the blockchain the only difference is where we store the keys and as we know Hardware wallets are the most secure wayTo do so and my favorite Hardware wallet is ledger now I know there's a ledger Nano S Plus and The Ledger Nano X and I made a comparison video right here to help you choose which one is right for you