A wallet whose keys are held on an internet-connected system so that transactions can be signed automatically.
Why it matters
Exchanges need hot wallets to process withdrawals at speed, which means some proportion of customer assets is always exposed to remote compromise. The Coincheck and KuCoin incidents were both hot-wallet losses. The question worth asking a custodian is what proportion sits outside cold storage, and what protects it.
What you can check
Operators generally publish which addresses are hot and which are cold. What is rarely published, and worth asking, is what proportion of customer balances sits in the hot tier and what authorises a movement out of it.
Where it showed up
Records in the Incident Tracker that turn on this: KuCoin hot wallet compromise and Atomic Wallet user fund theft.
Not advice. Definitions are for understanding, not instruction. Nothing here is financial, legal, tax or security advice.