Online storage Meaning

Dec 12, 2023 | Updated Dec 12, 2023

Online storage refers to the act of storing or holding data on a medium that connects to the internet. In crypto, it involves using cryptocurrency wallets connected to the internet to store and manage private keys.

What is Online Storage?

In the cryptocurrency context, online storage, also known as “hot storage”, describes a form of storage that holds the user’s private keys on a device or server connected to the internet. The device maintains a constant connection to the internet. It is the complete opposite of offline storage such as hardware wallets, which safeguard the user’s private keys in an offline environment with zero connection to the internet.

Some online storage devices include software wallets, custodial exchanges, online wallets, desktop wallets, web-based wallets, and mobile wallets.

The primary objective of storing your keys online is to secure and manage the private keys, which a cryptocurrency holder uses to access their digital assets living in the blockchain. However, connection to the internet makes them susceptible to hackers, malware attacks, and other attack vectors. Online storage devices are connected to the internet even when users are not conducting transactions. This gives malicious actors enough time to exploit vulnerabilities.

These devices are either custodial or non-custodial. Custodial storage implies that a third party is responsible for the custody of your private keys, while non-custodial storage places the responsibility of managing the private keys in the hands of the holder.