How does a hot wallet work?
Once you own a cryptocurrency, you receive key information that identifies you as the owner of those coins. The public keys work similarly to account names. They can be used to identify every single wallet on the network, giving you access to your tokens without revealing your identity.
Private keys, on the other hand, are comparable to a personal identification number or a highly complex password. They give you direct access to the wallet to check your account balance, initiate transactions and much more. If you are missing one of these two keys, the wallet is practically useless.
Hot wallets are applications that are connected to the internet and the infrastructure for cryptocurrencies and enable their use. For you, the hot wallet is the interface for accessing and storing cryptocurrencies. For the cryptocurrency network, its role is to facilitate any changes to the transaction records stored on the decentralised blockchain ledger for the cryptocurrency you are using.
When you use a hot wallet, you are making a trade-off between convenience and security. If you choose to use a hot wallet, you need to be aware of the risks associated with storing your cryptocurrencies online. These risks include hackers, malware, server failures and third-party misconduct.
What hot wallets are available?
You can download many hot wallets for free. Some wallets are specifically designed to be used in conjunction with certain mobile web apps. Some only work with a specific cryptocurrency.
Since there are so many wallets with different designs and uses, it is important that you research the individual storage app before downloading and using their services. Wallet developers have different expertise, different security and privacy claims, and each has different priorities when creating their wallets. Some charge fees, others do not.
A tip for using hot wallets
There are several aspects you should consider before choosing a specific wallet app. Most important are the security features and how you use them. Since your cryptocurrency is only as secure as the storage method you use, its safety and security depend on how you store your tokens. All items stored in a hot wallet are vulnerable to attack because the public and private keys are stored on the internet. To keep your cryptocurrency safe, consider the following tip.
Only use your hot wallet for transactions
It's a good idea to keep only a small portion of your cryptocurrencies in your hot wallet. For example, you could only store as much in it as you need for upcoming expenses.
Hot wallets are convenient, easy-to-use wallets that are best for storing small amounts of cryptocurrencies. They allow for quick and frequent transactions. However, they are not secure enough to store large amounts of cryptocurrencies that you do not plan to use often.