Understanding Warm Wallets in Cryptocurrency

In a recent response on X, Ripple’s CTO David Schwartz explained the concept of a warm wallet, a type of cryptocurrency wallet. Warm wallets are a lesser-known idea in the crypto space, where discussions typically revolve around cold and hot wallets. The term gained attention following a recent hack on the crypto exchange Bybit.

Recent Incident with Bybit

On Friday, a hacker gained control of one of Bybit’s cold Ethereum wallets, resulting in an estimated $1.46 billion in assets being transferred out in a series of transactions.

Bybit reported in a tweet that the unauthorized activity occurred when its ETH multisig cold wallet attempted to execute a transfer to its warm wallet. They stated, “Bybit detected unauthorized activity involving one of our ETH cold wallets. This incident occurred when our ETH multisig cold wallet executed a transfer to our warm wallet. Unfortunately, this transaction was manipulated through a sophisticated attack that masked the signing interface, displaying the correct address while altering the underlying smart contract logic. Consequently, the attacker gained control of the affected ETH cold wallet and transferred its holdings to an unidentified address.”

> “It’s an intermediate between a hot wallet and a cold wallet. More secure than a hot wallet and more convenient to access than a cold wallet. Unlike a hot wallet, human intervention is supposed to be necessary to transfer from it.”
> — David “JoelKatz” Schwartz (@JoelKatz) February 21, 2025

Definition and Comparison

An X user inquired about the term “warm wallet,” to which Schwartz replied, clarifying that a warm wallet is:

• An intermediate between hot and cold wallets.
• More secure than a hot wallet.
• More convenient to access than a cold wallet.
• Requires human intervention for transfers, unlike hot wallets.

Cold vs. Warm vs. Hot Wallets

• Cold Wallets: Maximizes security by keeping private keys offline on a device not connected to the internet. Each transaction must be signed by a human before being recorded on the blockchain.
• Hot Wallets: Always connected to the internet, allowing for automatic creation and recording of transactions without human intervention, but at a higher risk of being hacked.
• Warm Wallets: Combine the speed of hot wallets with the security features of cold wallets. While private keys are kept online and transactions can be made automatically, human interaction is necessary for signing the transaction before submission to the blockchain.

Similar to the situation with Bybit, some digital asset custody providers utilize a combination of storage methods, keeping a majority of funds in cold storage and making a smaller portion accessible via online hot or warm wallets.