Hot Wallet

A hot wallet is any Bitcoin wallet where the private keys are stored on a device connected to the internet. This includes mobile apps, desktop applications, browser extensions, and the wallet accounts provided by exchanges. The defining characteristic is internet connectivity: a hot wallet can sign and broadcast transactions at any time, making it convenient for frequent use.

The convenience of a hot wallet comes with a trade-off. A device connected to the internet is exposed to malware, phishing attacks, and remote exploits that do not threaten an offline device. If a device holding a hot wallet is compromised, the private keys could be extracted and the funds drained. For this reason, hot wallets are generally recommended for amounts used in regular activity, not for storing the bulk of a bitcoin holding.

The contrast with a cold wallet is the essential distinction. A cold wallet keeps private keys on hardware or paper that is never connected to the internet. To make a transaction with a cold wallet, the user must manually authorize it on the offline device. This added step is an inconvenience that becomes a security feature: it prevents any online attacker from accessing the keys directly.