Definition of Hot Wallet

What is a "hot wallet"? What is the definition of the term "hot wallet"?

You have likely heard the term "hot wallet" used when people talk about the crypto-currency Bitcoin.

One of the methods of storing Bitcoins is to use an electronic wallet. One of the most popular electronic wallets is called "My Wallet". Just like with a normal wallet, electronic wallets allow you to easily send and receive Bitcoins.

Now, what does the term "hot wallet" mean?

Definition of Hot Wallet - Financial Dictionary - Bitcoin - IllustrationA "hot wallet" is an electronic wallet that is connected to the Internet. For instance - if you have your wallet loaded on your laptop that you use to access the Internet, this would be called a "hot wallet". When using a "hot wallet", you are leaving yourself open to a theft (hacking), as you are connected to the Internet and somebody could technically break into your computer and access your wallet. Once your Bitcoins are gone, they are lost forever.

In order to protect themselves, people will leave their wallets on a computer or storage device that is NOT connected to the Internet - this is called having your wallet in "cold storage". Some people will even simply print out their keys on paper and tuck the paper away from safe keeping.

If you are just getting into Bitcoins, you need to read up on how to properly protect yourself against theft.

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