Hot Wallet

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A crypto wallet is said to be ‘Hot’ when it is connected to the internet.

Examples of Hot Wallets include Mobile, Software, Browser, Exchange, Custodian etc

They all involve the wallet having direct access to the internet for some part of the transaction or for the functioning of the software. They are much more convenient than cold wallets but this also means they have the potential to be hacked.

A true ‘Cold Wallet’ is one that has no direct link from the wallet to the internet. At no time are the private keys, seed phrase etc entered into anything that is ‘online’.

The ultimate ‘Cold Wallet’ is when you write down all of the details for your wallet on a piece of paper!

In practice Hardware Wallets have been developed that facilitate the use of your wallet details being kept offline as well as still allowing you to trade.