Good question. Usually, for reliable electronics lower temperature is preferred. I do not know what temperature is reached internally and whether this is a significant cause of premature failure. I did make some surface temperature measurements.
Yo-yo top surface center measured temperature rises over ambient, power supply driving one amp into a resistive load box, at a constant 27.0 C room temperature:
fully wound power cord: 16.0 C over ambient (43 C measured surface temp)
one turn remaining: 14.0 C over ambient
fully unwound power cord: 13.8 C over ambient
unwound, paper draped: 18.1 C over ambient (single sheet of laser printer paper on top, simulating my office clutter, 45.1 C measured surface temp)
The cord wrap does make a measurable temperature difference of unknown significance, so always unwrapping all but the last turn (not my original recommendation!) is perhaps a reasonable precautionary strategy given that cord fatigue at the ends is a observed failure mechanism...unless the cord starts breaking along its length faster than the yo-yo fails from temperature! [?] [
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