Hot storage is a type of Bitcoin wallet that stores your private keys on a device that is connected to the internet. When you want to use Bitcoin, it’s as easy as scanning a QR code or inputting the address directly from your wallet. Many hot storage solutions have passwords or 2FA to make it easier for unwanted parties to gain access to the wallet.
Any time you store bitcoin on a cryptocurrency exchange, you are using a hot wallet. Other types of hot wallets include mobile wallets and desktop wallets. Hot wallets are, by far, the most convenient type of Bitcoin wallet because it allows you to spend instantly without fetching another device to connect to the internet. It is safe to use hot wallets, but it is important to keep in mind that hot wallet private keys are usually stored in an account-based database connected to the internet. Over time, these databases become honey pots full of private keys with access to lots of people’s Bitcoin wallets. If one of these databases is compromised, all the private keys for each wallet can be taken without consent. This is why it is not recommended to have large sums of BItcoin in a hot wallet. Andreas Antonopoulos’ famous phrase, “Not your keys, not your bitcoin” emphasizes this point.