Hot Wallets Explained

Hot wallets are software-based cryptocurrency wallets that connect to the internet. They are commonly used for sending and receiving crypto, interacting with decentralized applications, and managing assets that need to be accessed frequently.

This page explains how hot wallets work, what they are commonly used for, and the trade-offs involved when using them.

What makes a wallet “hot”?

A wallet is considered “hot” when it runs on an internet-connected device such as a smartphone, browser, or computer. Transactions are signed using private keys controlled by the user, but the wallet software itself remains online.

This connectivity allows for fast interaction with blockchain networks, but it also introduces different risks compared to offline (cold) wallets.

Why hot wallets play an important role

Hot wallets exist because many common crypto activities require frequent interaction:

• Sending and receiving crypto quickly
• Connecting to decentralized applications (DeFi, NFTs)
• Managing tokens across multiple networks
• Testing or learning new blockchain tools

For many users, hot wallets act as a working wallet, while cold wallets are used for long-term storage.

COMMON TYPES OF HOT WALLETS

  • Mobile wallets

    Apps installed on smartphones. These prioritize convenience and are often used for daily transactions.

  • Browser wallets

    Browser extensions that connect directly to websites and decentralized applications.

  • Desktop wallets

    Wallet software installed on a computer, often offering more advanced controls.

Examples of commonly used hot wallets

There are many hot wallets in use today, each designed for different ecosystems and use cases. Commonly used examples include:

• **MetaMask** — widely used browser and mobile wallet for Ethereum and EVM-compatible networks
• **Xaman (formerly XUMM)** — wallet designed for the XRP Ledger ecosystem
• **Trust Wallet** — multi-chain mobile wallet supporting a broad range of assets
• **Bifrost** — wallet focused on interacting with specific blockchain ecosystems and decentralized applications

These examples are listed to illustrate common categories of hot wallets, not to recommend any specific product.

How hot wallets are used in practice

Hot wallets typically act as the interface between the user and the blockchain. They generate transactions, display balances, and connect to networks through nodes or third-party services.

When using browser or mobile wallets, users often approve transactions, smart contract interactions, and permissions directly within the wallet interface.

TRADE-OFFS TO UNDERSTAND

  • Strengths of hot wallets

    • Easy to access and use
    • Ideal for frequent transactions
    • Required for many apps and services
    • No additional hardware required

  • Limitations to be aware of

    • Connected to the internet
    • More exposed to phishing and malicious approvals
    • Not designed for long-term storage of large balances

Using hot wallets responsibly

Using a hot wallet responsibly often means limiting exposure rather than avoiding them entirely.

Common practices include:
• Keeping smaller balances in hot wallets
• Reviewing transaction approvals carefully
• Avoiding unknown links and unverified apps
• Using cold wallets for long-term storage

Hot wallets are tools — how they are used matters more than the software itself.

How hot wallets compare to cold wallets

Hot wallets and cold wallets serve different roles.

Hot wallets prioritize accessibility and interaction, while cold wallets prioritize offline key storage. Many users choose to use both as part of a broader self-custody approach.

Hot wallets — common questions

Are hot wallets safe to use?

Hot wallets are widely used, but they are exposed to more risks due to internet connectivity. Understanding how they work and limiting balances is common practice.

Should beginners start with a hot wallet?

Many beginners start with hot wallets to learn how transactions work before moving larger balances to cold storage.

Can hot wallets be used with cold wallets?

Yes. Many users use hot wallets for interaction and cold wallets for storage.

Continue learning

If you’re exploring wallet options, the following pages provide additional context:

• Hot Wallets (Hub)
• Cold Wallets (Hub)
• Wallets — Hot vs Cold

Each page focuses on understanding rather than recommendations.