A hot wallet is a type of cryptocurrency wallet that is always connected to the internet or another networked device. This constant connectivity allows users to quickly access their digital assets, send and receive cryptocurrencies, and interact with decentralized applications (dApps) and exchanges in real time.
Key Features of Hot Wallets
• Software-based and typically installed on devices like smartphones, laptops, or accessed through web browsers.
• Store private keys (the secret codes required to access and manage your crypto) online, making transactions and balance checks fast and convenient.
• Commonly used for day-to-day transactions, trading, and interacting with crypto platforms due to their ease of use and accessibility.
Security Considerations
• Because hot wallets are connected to the internet, they are more vulnerable to cyberattacks, hacking, and malware compared to cold wallets, which store private keys offline.
• Best practice is to use hot wallets for smaller amounts or frequent transactions, while storing larger sums in more secure cold wallets.