Topic: Managing Hot n Cold Wallet (Read 1035 times)

Sound gr8... can u plz elaborate...

If you are using cold wallets, get a new computer (a netbook will work), and install armory on it, and make sure it never touches anything else, even internet. Whenever you want to transfer out, use a camera (your mobile cam will do) to sign the transaction.

That's a really smart strategy ... thanks for the idea..

I am not sure what exactly other forum members recommend but i can tell you how i have been managing it for Unocoin.com which now holds many hundreds of customer wallets.

To make the things as easy as possible, apart from hot wallet and cold wallet - there is a need for another wallet and i can term it as warm wallet
When ever hot wallet reaches a threshold, i move the bitcoins to a warm wallet. The hot wallet exists on the server and the warm wallet exists on my computer. Next when ever warm wallet reaches its threshold i will move it to cold wallet for which the encrypted keys are there in bank locker. If server gets compromised only hot wallet is gone and warm wallet is still safe and cold wallet has always been safe.

Using this model i am able to maintain with less than 5% of wallet funds on the server and another 5-10% on my personal computer.
When ever there is a bit big withdrawal, i do not want to run to the bank to access the cold storage - so here the warm wallet comes in handy. I just transfer the needed extra coins from warm wallet to hot wallet and process the withdrawals. And again based on thresholds i will move new bitcoins from hot to warm. Now moving from warm to cold will take more time coz the warm was used up just now.

Using this model, there has been no need for me to access cold storage even once to fulfill the customer's withdrawal till now. If lots of customers try to withdraw at same time - i ofcourse will need to access my cold storage to fulfill those withdrawals though.

I meant the transactions done using API and not directly by logging into blockchain.info

Blockchain.info charges 0.0001 BTC till date as standard. If the Tx wight (amount of data) is more, they charge more. But I was never charged 0.0005 BTC, though my wallets are full of freebitco.in & coinlearn.org satoshis, i.e. Tx data gets heavy with small amounts summing up.

You are asking for the architecture.
Do scope out the forums, there are tonnes of them around in the Technical section, albeit old.

Hi,

Yes I understand the basic concepts of hot n cold wallet.

What I am looking at is a more advanced professional approach. Someone managing large btc account or an exchange would understand

Still looking for proper solutions....

Thanks in advance!

Well to understand the concepts of hot and cold wallet you must first understand the concepts of public and private keys..

I hope you are aware of it...

An hot wallet is one which is connected to the internet, where you can send and receive bitcoins...

But a cold wallet is a one where you can only recieve bitcoins but you cannot send any, because cold wallet is nothing but the wallet disconnected from the internet. like you put your wallet file in a usb drive and keep it inside your locker, or you make a paper wallet( simply writing both your public and private key in a paper) and storing it in a locker...

The real difference is theoretically no one can hack in to your wallet when it is disconnected from the internet right? That is the benefit of having cold wallets and major exchanges have cold wallet storages for security...

Did you understand..

Probably user meant the transaction fee. Blockchain.info charges 0.0005 Btc as min even though the standard network fee now is 0.0001 Btc.

Blockchain and Coinbase charge??

Thanks guys for this wonderful info. However it increased my curiousty further as to...

- what is the best tool to manage the hot wallet than? Remember blockchain n coinbase charge u per transaction
- can we manage hot wallet using desktop clients ...how to manage security than
- also cold wallet .... u have to withdraw whole amount... is there anyway that we can do partial withdrawal

Please note I have to manage only a few(1-2) accounts. We are not managing customer based wallet

Please let me your kind inputs.

I agree hot wallets are always risky but for the sake of convenience you can keep 2-5% of your service bitcoins on hot wallets and store the rest in cold storage. Bringing bitcoins from cold storage to hot wallet is pain in the ass for sure. I would also suggest do not put all bitcoins into a single cold storage address - create new address say for every 50 bitcoins or so.

For cold storage option you can also use armory that will create the transaction on the online computer and signs it on offline computer.

I dont really think using a coinbase api or blockchain.info api would significantly secure you because if the server gets compromised, then wheter be it bitcoins on the bitcoind or on your coinbase / blockchain.info - they can be stolen. I ofcourse do recommend these apis just the sake of simplicity and reduce burden on server and your development time.

No matter what you do, hot wallets will always have a security risk attached to them.

The safest option to offer is timed withdrawals, where the payouts are processed from the cold wallet system at certain intervals.

Another option for a lazy hot wallet solution would be to securely build up on Coinbase or blockchain.info's API. These are relatively secure if all necessary precautions are taken.

I think u may have pre-defined limit in your system that is required to suffice for the system's day to day activity. Beyond this limit funds will be transferred from Hot wallet to Cold wallet.

I know that...need technical strategy for managing both...

Maybe community mod can help me or some senior member

Hot wallet is the wallet from where all the payments are sent and received. Cold wallet is the wallet that is like your savings account. It is a watch only kinda wallet and is used as a savings account.

Hi Guys,

I am developing an transaction system for one client where there is a need for managing cryptocurrencies online mainly in hot wallets. However to safeguard i understand we can create cold wallets.

My query is What is the best strategy to manage Hot n Cold Wallets for different crypto currencies safely??

Any professional help would also be helpful, if needed please PM me.

Thanks!