A cold wallet and a hot wallet are both stores for your cryptocurrency. The main difference between them is that cold wallets are not connected to the internet, whereas hot wallets are. Both are designed for different purposes and, in many instances, people who hold cryptocurrencies have both.
A hot wallet is stored online through platforms who offer a storage service (such as Luno). It is heavily encrypted. With a hot wallet, users trust the platform to store and secure their private and public keys. Because it is online, it means you can gain access to your crypto more easily.
A cold wallet is a preferred choice for people who want to have more control over their cryptocurrency. They offer a higher level of security from digital threats, as they are kept offline. Where hot wallets are more vulnerable to hackers, cold wallets are more vulnerable to physical threats.
There are two main types of cold wallets solutions. A paper wallet is a print out of the private key and public address on a physical piece of paper. They are suitable for long term storage, as they are out of reach from hackers.
The downside is that a paper wallet can get damaged or lost. A hardware wallet is a physical offline device, similar to a USB, that stores your private keys and can be plugged into your computer when you need to transfer cryptocurrency. It is harder to damage, but also needs to be stored in a secure location.