What is a hot wallet?
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 4 min
In short
A hot wallet holds private keys on an internet-connected device. It sends instantly and connects easily to DeFi and NFT services, but a compromised device means lost funds. The usual rule is to keep only what you actually use day to day.
Key points
- Keys live on an internet-connected device
- Transfers and app connections are immediate
- A compromised device means losing the funds
- Keep the balance limited by design
Definition
A wallet that holds keys on an internet-connected device and can sign and send immediately — typically a phone app or browser extension.
Browser extensions such as MetaMask and phone wallet apps are the typical examples. You connect to a site and sign on the spot, which is what makes swapping on a DEX or buying an NFT feel seamless.
The risk is that the device holding the key is the attack surface: fake extensions, phishing pages and malware are all routes in. The most common loss is signing without reading on a site that asks you to connect — the signature can hand over permission to move your tokens.
The practical approach is to keep only an amount you could afford to lose in the hot wallet and hold the rest on a hardware device. Periodically revoking approvals for services you no longer use removes paths that can be exploited later.
Watch out for
- · Read what a signature request actually authorises before approving it
- · Open sites from bookmarks; sponsored search results have led to fakes
- · Do not leave large balances sitting there long term