What Is the Difference between Hot and Cold Storage in the Context of Futures Settlement?

Hot storage refers to holding cryptocurrency private keys online, which allows for quick access but exposes the assets to greater hacking risk. Cold storage involves keeping private keys offline, significantly reducing the risk of unauthorized access but making asset transfers slower.

For futures settlement, custodians use cold storage for the bulk of assets, moving only necessary amounts to hot wallets for delivery, balancing security and operational needs.