Hot wallets - CryptoKnowhow

What are Hot Wallets?

Hot wallets, also known as hot storage, refer to cryptocurrency wallets that are connected to the internet and accessible for immediate transactions. These wallets are typically used for day-to-day transactions and trading activities, providing convenient access to funds whenever needed.

Hot wallets offer quick access and flexibility. But they are more vulnerable to hacking and unauthorized access compared to cold storage solutions. Therefore, users often balance the convenience of hot wallets with the security measures necessary to protect their assets from potential cyber threats.

Self-custody & Hot Storage

As we explained with cold storage, self-custody is quite important. Not your keys, not your crypto. With both Hot and Cold storage you do own your private keys yourself, meaning you own the access to the crypto yourself and can do whatever you want with it when you want it. Leaving it on an exchange however.. We can give some examples of past experiences with centralized exchanges such as FTX or MT Gox. They didn’t exactly operate by the book resulting in bankruptcy and many victims with losses totaling over the billions. With Hot Wallets you own the secret phrase yourself and thus own your crypto.

Hot wallets are nothing else than online wallets connected to the internet. A piece of software you might call it. It’s crucial to understand that hot wallets function as interfaces facilitating interactions with the blockchain rather than physical storage devices. Just like with cold storage, you don’t store it inside the wallet, but rather use an interface to interact with the Blockchain.

Your cryptocurrency holdings remain on the blockchain itself, with hot wallets providing a convenient and accessible means to manage and transact with your digital assets. Despite their convenience, hot wallets are easier targets of hackers. You need to be careful with your online connectivity and in general computer security. Additionally, we’ve provided a more extended resource about security of your wallets.

Which more known Hot wallets are out there?

On this site we will discuss the more known brands for hot storage. However, there are plenty of choices in terms of hot storage and they are in no way a recommendation. We are aware of the fact that there are more than 50 wallet providers! Always DYOR to see which wallet fits you best..

Exodus

MetaMask

Trust Wallet

All the links provided will go to the download page of the Hot wallet provider. In here they provide easy steps on how to setup your wallet. We will give a few tips upfront:

Never back-up your seed phrase online while setting up your wallet;
Rather back it up stamped in metal/written on paper in a water-resistant and fireproof safe or lock-box at the bank;
Make sure to have a clean virus free and trustworthy PC/MAC/iOS/Android and WiFi/LAN environment;
Don’t use public WiFi in general for anything crypto related;
Use 2FA wherever you can preferably through an authenticator app.

More Good Practices

Once you are setup, you are ready to interact with DeFi! Some of the wallets have native DeFi built in and you can directly with dApps through your wallet app.