Hot wallets are online wallets, smartphone/tablet wallets and wallets on a computer which connect to the internet.
They are called hot wallets because in all instances above the private key or master seed data has a potential to be compromised.
With an online wallet your Bitcoin private keys are in the hands of a third party such as an online wallet provider or exchange.
Cyber criminals have been successful on several occasions in gaining access and stealing these private keys worth millions of dollars.
Many online wallets and exchanges have massively stepped up security with two and three factor authentication but is still the least safe storage method.
Smartphone/tablet wallets are more secure than online/exchange wallets. Cold storage is the safest option.
The security of a wallet on your computer or smartphone/tablet depends on your own personal internet security habits.
The use of a reputable VPN such as NordVPN is asvisable when creating and using wallets on your devices.
This encrypts the data and prevents anybody snooping on your connection from seeing the data.
A Cold Wallet or Cold Storage means storing your Bitcoin offline. There are two types of cold storage, either create a paper wallet offline or purchase a hardware wallet to store your Bitcoin private keys. Cold storage is the safest option to store your Bitcoin.
Hardware wallets make it easier to spend your Bitcoin directly from it and can handle all your private keys. Some hardware wallets allow you to store multi crypto currencies on one device.
Paper wallets store your Bitcoin offline and have just one public and private key. The public key is visible and used to send Bitcoin to the paper wallet, the private key is kept hidden and only revealed when you want to spend the funds. The private key is imported into an online or ‘hot’ wallet and the funds become available to spend.
Always import the whole balance from, or ‘sweep’ the paper wallet and be sure not to use it again as once the private keys have been exposed the wallet is no longer secure.