Hot Storage Definition
Hot storage refers to crypto assets held or stored in a way that they are constantly or frequently connected to the internet. This method of storage is also known as online storage, and it is more convenient for frequent trading and transactions, but comes with increased risk due to potential online threats.
Hot Storage Key Points
- Hot storage means keeping cryptocurrency in a wallet that is always connected to the internet.
- It is ideal for frequently used crypto, e.g., for trading or transacting on a daily basis.
- The ease of accessibility comes with increased risk from online threats like hacking and phishing.
What is Hot Storage?
Hot storage is a term associated with cryptocurrencies, referring to a storage method where digital assets are kept online, directly connected to the internet. This setup enables users to easily access and use their crypto assets, primarily for regular transactions and exchanges. It’s akin to keeping money in a wallet or a checking account for everyday use as opposed merely storing it.
Why Use Hot Storage?
Hot storage is frequently employed by regular crypto traders and users due to its convenience and accessibility. Those who perform daily operations or transactions with their digital assets find hot storage practical and beneficial, as it allows instant access to these assets, yielding ease in trading, spending, or transferring.
How Does Hot Storage Work?
Hot storage functions by storing the private keys of a cryptocurrency in a device or platform that’s constantly connected to the internet. This could take the form of online wallets, desktop wallets, or mobile wallets. These storage types permit immediate access to funds, but also expose these assets to potential online threats.
When to Use Hot Storage
Hot storage is ideally used if one frequently trades or transacts using cryptocurrencies. It’s a suitable choice for those who engage daily with their digital assets, requiring constant and quick access. It is, however, not the best option for long-term investors or “HODLers,” who keep their digital assets secure for a long time, as they could be exposed to unnecessary risks.
Hot Storage Risks
Whilst hot storage provides convenience and speed in accessing and utilizing digital assets, it comes with significant risks. Primarily, the constant connection to internet makes it vulnerable to an array of online threats, including phishing, hacking, and even system crashes. Thus, hot storage should be employed with tools and enhancements for optimal security.
