Hot storage refers to the following types of digital asset placement:

• in online applications and online wallets;
• on exchange accounts;
• on accounts of other trading platforms.

All these methods are united by one factor - storing information on the internet. What features, advantages, and disadvantages does this method of holding cryptocurrencies have? Let's examine hot storage in more detail.

What advantages are provided to users?

• Such wallets allow for the fastest blockchain transactions. The user downloads a small application and starts working after a couple of clicks. Installation does not require downloading several dozen gigabytes, as in the case of cold wallets.
• Online wallets provide quick access and have additional features for comfortable use. Exchange wallets allow for lightning-fast trading transactions. All security of users' funds is in the hands of the companies that created them.
• There are wallets in the form of browser extensions, which are even more convenient, but security issues are already the responsibility of the computer owner.
• When working with such wallets, it is necessary to reliably record the mnemonic phrase. It will be required at each new wallet launch and will prevent access by unwanted persons.

Disadvantages of hot storage

• The need for an internet connection when working with a hot cryptocurrency wallet is the most significant disadvantage. A leak from a cryptocurrency company's server or a computer infected with malware can deprive the user of all tokens.
• Before using an online token storage service, it is necessary to study the project to assess its reliability. Personal computers should be protected against viruses and phishing programs that increase the risk of private key or mnemonic phrase leaks.
• Hot wallets should be used for transactions and trading activities. Long-term storage is better carried out on paper or hardware wallets.