Hot wallets are crypto currency wallets that are installed on computer devices like a pc a mobile phone or a smart tablet. Do not be confused by a Desktop Wallet as these are essentially the same thing but for a PC. The cryptocurrency ‘hot wallet’ is different to a ‘cold wallet’ as it is connected to the internet. The way you access your wallet online, enables the security measures to be weakened compared to an offline device. As in, they are not 100% secure.
Advantages of a hot wallet
are perfect for quicker transactions than a hardware wallet to make purchases and transfer funds. It is quite common for a user to have multiple wallets depending on the cryptocurrency they have in their portfolio, and the distribution of their assets to reduce risk.
Disadvantages of a hot wallet
The downside of having a wallet is that you have the potential to be hacked. Its not completely unsafe, as the hot wallet is still linked with public and private keys. These act as a security measure in itself. It is just that the hot wallet adds a little bit more risk because of the internet ‘online’ connection. Your best bet is to turn off your wifi if your not using your computer, and don’t leave it on at night, and do not do things like copy keys in cache and forget about it!
Types of Hot Wallets
There are many types of wallets available and many are free to download, but would you want to use a free product to send and receive cryptocurrency? Some wallets are flexible enough to have multiple currencies on them, and some can synchronise with your mobiles apps, and also have some good robust features, especially from a UI Navigational perspective.
Please do some due diligence before downloading a hot wallet and using it straight away. There are some unscrupulous hackers pretending to be developers, that could potentially wipe your account out. Even if they are legit, they may not be focusing on updating the wallet on a regular basis. This eventually could cause security flaws in the software as the ecosystem evolves. If you do decide to go down the hot wallet route then as an added security measure some reputable ones will have hardware support. This means that you will need to have a hardware wallet connected to your pc. This as a security mechanism to login to the wallet.