Hot wallet

Being online is what makes a hot wallet convenient: transactions can be signed and broadcast in a click, no separate hardware needed. That same connectivity is also the attack surface malware and phishing rely on.

As an illustration of a common industry pattern (not a specific platform's real figures): a platform might keep only 5% of total customer funds in hot wallets for everyday withdrawals and hold the other 95% in cold storage — on a hypothetical $100,000,000 balance, that would mean about $5,000,000 (5% of $100,000,000) is reachable online at any given time.

A common mistake is leaving large balances in a hot wallet — including an exchange account — purely for convenience, instead of moving anything beyond short-term trading needs into cold storage.