Hot wallet

A hot wallet is a wallet whose keys live on a device connected to the internet. Phone apps, browser extensions and exchange balances are all hot. The connection makes them quick to use and quicker to attack.

The appeal is speed. Open the app, paste an address, confirm, done. For day-to-day spending, swapping coins or interacting with a website, a hot wallet keeps the private key right where you need it. That convenience is the whole point.

It is also the weakness. Because the key sits on an internet-connected machine, malware, a phishing site or a fake browser extension can reach it. If your laptop is compromised, the key can be too. An offline device does not have that exposure, which is why people split their holdings.

The common pattern is a two-tier setup. Keep a small float in a hot wallet, the way you carry some cash in your pocket. Park the larger balance in cold storage or on a hardware wallet, the way you keep savings in a vault. If the hot wallet is drained, you lose the float, not the lot.

Hot does not always mean self-custody. A wallet app where you hold the seed phrase, the 12 or 24 words that restore your keys, is yours to control. An exchange balance is a custodial hot wallet: the platform holds the keys, so you depend on its security and its policies. Both are online; only one is under your control.

Treat a hot wallet as a spending account, not a vault. Keep the device updated, install apps only from official sources, and never paste your seed phrase into anything. When Banxa sells you crypto, it sends the coins to whatever address you give, hot or cold, so you decide where they sit.