Hot wallet
A hot wallet is a crypto wallet whose keys are kept on a device or server connected to the internet, which makes it quick to use but easier to attack.
Also called online wallet, software wallet
Hot and cold describe whether a wallet's private keys are online. A phone app, a browser extension and an exchange's withdrawal system are hot. A hardware wallet, or keys kept on a machine that is never online, is cold. A hot wallet can sign a payment in seconds. Cold storage needs a person and a device, so it is slower and safer.
Example. A casino keeps part of its funds in a hot wallet so it can pay withdrawals automatically. Your withdrawal of 200 dollars goes out in minutes. A withdrawal of 50,000 may be more than the hot wallet holds, or more than the automatic limit, so staff have to approve it or move funds first. That can take hours or longer.
What people get wrong. Hot does not mean custodial. Hot or cold is about whether the keys are online. Custodial or self-custody is about who holds the keys. Your own phone wallet is hot and self-custody. A casino balance is custodial, whatever wallets the casino uses behind it.
A slow large withdrawal is not always a bad sign. A casino that will not explain the delay is.
Related terms
- Custodial wallet
A custodial wallet is one where a company holds the private keys and controls the crypto for you, as an exchange or a casino account does.
- Self-custody
Self-custody means you hold the private keys to your crypto yourself, usually backed up as a seed phrase, so that only you can move it.
- Confirmation
A confirmation is a block added to a blockchain that includes your transaction or builds on top of it, and each extra one makes the payment harder to reverse.
- Network fee
A network fee is what a blockchain charges to process a transaction, and it is set by the network and how busy it is, not by the casino.