In Crypto, there is a term referred to as hot and cold storage.
Hot storage is when you have your Crypto coins/tokens/Nfts,etc in a digital storage facility (hot wallet, exchange, etc) where your funds can be accessed by an internet login portal or something similar.
For example, your regular Metamask account,
Hot storage is when you have your Crypto coins/tokens/Nfts,etc in a digital storage facility (hot wallet, exchange, etc) where your funds can be accessed by an internet login portal or something similar.
For example, your regular Metamask account,
Hot wallet example:
The reason this is a hot wallet, is because if you know my username and password, then you can login into my Metamask. And because it is a default Metamask account, (default meaning an account that Metamask auto generates from you creating an account) then all you need to do to withdraw my funds is send it. There is no hardware wallet shielding the transaction.
Cold Storage
Cold storage means your funds is stored in your ledger directly on the Blockchain. Your seedphase is unknown to anyone in on the internet because you kept it offline using a Ledger wallet which is like a shield that allows you to talk to the blockchain without revealing your seedphrase. Even if someone hacks your Metamask account, as long as your funds are stored on your Ledger wallet, they will not be able to withdraw your funds unless they have their hands on your physical ledger device to approve to the transaction (which of course only you have).
This allows you to participate in DEFI while protecting your funds as long as you avoid all unknown websites with smart contracts as laid out on the common scams page.
This allows you to participate in DEFI while protecting your funds as long as you avoid all unknown websites with smart contracts as laid out on the common scams page.