Hot Storage Meaning
What is Hot Storage in Crypto
Hot storage refers to any crypto wallet that secures the private keys for your blockchain assets within a software that is connected to the internet.
A hot wallet can be an application or web/cloud-based platform that can be accessed from a computer, mobile device, or the cloud.
How Do Hot Wallets Work?
Crypto wallets have two types of keys that act as a form of identification, allowing you to send and receive assets from your wallet: public and private keys. The purpose of a crypto wallet is to protect your private keys.
Private keys give you control over your crypto assets. This essential piece of data gives you agency over your blockchain address, and allows you to control whatever crypto assets are there. Hot wallets protect your private keys by securing them within a software interface. This interface is always connected to the internet, in other words, it’s “hot”. By contrast, cold wallets secure your private keys in a device that is isolated from internet connection.
So hot wallets secure private keys, and they do so in an online interface, as opposed to an isolated device.
Are Hot Wallets Safe?
Hot wallets offer a convenient way to store your crypto private keys, because you can access them from any connected device. They are also designed to work with smart contracts, which makes them a valuable tool for exploring Web3. That said, hot wallets are also vulnerable to hacks, precisely because they are connected to the internet.
For example, a skilled hacker can deploy malware via your internet connection that manipulates your hot wallet. This can enable them to tamper with the interface as you send transactions, or even extract your private keys. In both cases, the crypto secured by those private keys would be vulnerable.
Hacks will always be a possibility as long as you’re managing your private keys via hot storage, because the attack vector is your internet connection.
The only truly safe way to manage your private keys is to secure them in a cold wallet, which keeps them completely isolated from your internet connection.
Crypto Hot Wallet Examples
There are hundreds of different hot storage options for your crypto private keys, but here are a few of the most commonly used options in the space.
Note: Before using a digital wallet, check out the security and privacy policies, and be sure you’re comfortable with them. Some crypto exchanges require you to complete an identity verification step before using their hot wallet, while some are fully anonymous.