Definition
A hot wallet is a wallet arrangement in which signing keys are available to a device or service that is connected to a network during normal use. It is commonly used for frequent payments because transaction creation and signing can happen without an offline transfer process. Hot describes connectivity and key exposure, not ownership: a hot wallet can be self-custodial or operated by a custodian. Encrypting a wallet file or protecting an account with authentication helps address some risks, but malware may still target an unlocked signing environment or substitute payment details. Backups remain essential because connectivity does not provide automatic recovery. A user may keep limited spending funds in a hot wallet while using a separate arrangement for other holdings, but the appropriate setup depends on practical needs. The key distinction is where spending authority becomes available when a transaction is authorized.
Source references
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