Technical Definition

Hot Wallet

A wallet whose private keys are held on an internet-connected device.

By Crypto University Editorial
BlockchainTransactionWallet

✦ Key Insight

Convenience and exposure are the same property here. Hot wallets are the right tool for active use and the wrong place for long-term holdings.

✕ Common Misconceptions

Letting a hot wallet accumulate a large balance because it is convenient. Also leaving old token approvals active — a compromised contract can drain a hot wallet without touching the seed phrase.

Detailed Explanation

Browser extensions and phone wallets are hot wallets. They are fast and convenient for trading and interacting with apps, and their keys sit on a device that can be compromised by malware or a malicious approval.

In Practice

“A trader keeps a small working balance in a browser wallet for swaps and holds the bulk of the portfolio on a hardware wallet.”

Dig Deeper

Wallet

Software or hardware that stores your private keys and lets you sign transactions.

Token

An asset created by a smart contract on an existing blockchain rather than being that blockchain's native currency.

Blockchain

A shared, append-only record of transactions maintained by many independent computers at once.

Transaction

A blockchain transaction is a signed or authorized instruction that changes blockchain state or transfers value when accepted by the network.