What is a Hot Wallet?
A hot wallet is a type of cryptocurrency wallet that is connected to the internet, enabling users to store, send, and receive digital assets like Bitcoin, Ethereum, and other cryptocurrencies. The direct connection to the internet makes hot wallets convenient for frequent transactions and trading activities since they provide easy access to funds.
Hot wallets are commonly used by cryptocurrency exchanges and individual users who engage in regular trading or require immediate access to their assets. While hot wallets offer significant convenience, their internet connection also makes them more vulnerable to cyberattacks and hacking attempts. As a result, security measures such as two-factor authentication (2FA), strong passwords, and regular monitoring are essential when using hot wallets.
Popular types of hot wallets include web wallets, mobile wallets, and desktop wallets. For larger or longer-term storage, many users prefer to transfer a portion of their assets to a more secure, offline storage option known as a “cold wallet.” Hot wallets and cold wallets often work together in a layered security approach, balancing accessibility with enhanced protection.