Hot Storage
In short: Hot storage is the online storage of the secret (private) keys that control cryptocurrency, so funds can be accessed and moved quickly.
Hot storage is the online storage of the secret (private) keys that control cryptocurrency, so funds can be accessed and moved quickly. It is the opposite of cold storage, where keys are kept offline.
Why it matters
Speed is the reason hot storage exists. Exchanges, payment services and active traders need to send funds at any hour without first fetching keys from an offline device. The cost is exposure, since anything reachable online can be targeted by attackers. A common approach is to keep only what daily activity needs in hot storage, protect it with limits, monitoring and access controls, and hold the rest in cold storage.
Example
A payment service keeps enough coins in hot storage to cover a normal day of customer withdrawals, and its system signs and sends each withdrawal automatically. When the hot balance runs low, staff move a planned amount from cold storage to top it up. If the hot system were ever compromised, the loss would be limited to that working balance rather than the full reserves.