Cryptocurrency wallets may also be defined as “hot” or “cold,” according to the way they operate.
A hot wallet is any wallet that is connected somehow to the Internet. For example, when you create an account on Binance Clone paltform and send funds to your wallets, you are depositing into platform’s hot wallet. These wallets are quite easy to set up, and the funds are quickly accessible, making them convenient for traders and other frequent users.
Cold wallets, on the other hand, have no connection to the Internet. Instead, they use a physical medium to store the keys offline, making them resistant to online hacking attempts. As such, cold wallets tend to be a much safer alternative to “storing” your coins. This method is also known as cold storage and is particularly suitable for long-term investors or “HODLers.”
As a way to protect users’ funds, Binance Clone only holds a small percentage of coins in its hot wallets. The remaining is kept in cold storage, disconnected from the Internet. Noteworthy, Binance DEX provides an alternative for users that prefer not to keep their funds in a centralized exchange. It’s a decentralized trading platform that allows you to have total control of their private keys, while also being able to trade directly from their cold storage devices (hardware wallets).
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Source: https://academy.binance.com/en/articles/crypto-wallet-types-explained
