What kind of Wallets are used by an Exchange? - page 2.

Stalker22

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Quote from: Bureau on April 18, 2023, 10:04:12 AM

I am aware that exchanges use a combination of hot and cold wallet. I am still on the process of learning. Is it possible for someone in this forum make me understand first what is hot & cold wallet and then how it function on an exchange.

In terms of exchanges, a hot wallet is a wallet that is online and is used for storing small amounts of coins that are needed for day-to-day transactions, such as withdrawals and deposits. They are more vulnerable to hacking and exploit attempts, and therefore they are not recommended for storing large amounts. On the other hand, a cold wallet is a cryptocurrency wallet that is not connected to the internet and is used for storing large amounts of coins that are not needed for immediate use. Cold wallets can also have additional protections, such as multisig, so that there are multiple keys needed to access the funds. A hardware wallet is a typical type of cold wallet that stores the user's private keys on a dedicated device, but there are other types as well.

Zaguru12

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Quote from: Bureau on April 18, 2023, 10:04:12 AM

I am aware that exchanges use a combination of hot and cold wallet. I am still on the process of learning. Is it possible for someone in this forum make me understand first what is hot & cold wallet and then how it function on an exchange.

The difference between a hot wallet and a cold wallet is that the hot wallets are those are connected always to the internet with all his keys prone to hack example is the trust wallet. While the cold wallet are those are stored offline and only comes online only for signing of a transaction example is the hardware.

Just like the what little Mouse said the exchange uses both hot and cold wallets. The address generated for you on exchanges are hot and custodian wallet. While the exchange use cold storage to save those huge funds so as to keep it off from hack

Little Mouse

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Exchanges use both hot and cold wallet as you said. They use cold wallet for storing large amounts. They receive the coins in hot wallet as form of deposit from different users and they send most of them to their cold wallet.

Cold wallet = wallets which are not connected online, they are offline wallet. When you need to use fund from cold wallet, you can sign transaction offline and then broadcast with a software online.

Hot wallet = Wallet which is always connected to online.

Quote from: 348Judah on April 18, 2023, 10:15:07 AM

If you're using an exchange wallet, then know it that they have custody to your private keys, these keys are what gives you access to your bitcoin stored on the blockchain because they decrypt the encrypted codes to give you right to access you coins

There's nothing like encrypted or decrypted. I don't know what did you mean. Exchanges only give you an unique address assigned to your account and some digits (your deposited amount). That's it.

348Judah

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If you're using an exchange wallet, then know it that they have custody to your private keys, these keys are what gives you access to your bitcoin stored on the blockchain because they decrypt the encrypted codes to give you right to access you coins, this comes in when you learn about the category of wallet types we have, a custodial and non custodial wallet, if anything should happen to your exchange, indirectly or directly, you will be affected as well and loose your entire investment with them, so what should stop you from getting decentralized.

Bureau

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It has become quite common for an Exchange to get hacked.

Apart from basic security measures that I know as a user, which are 2FA, not your key, not your coins & non custodial wallet. Did anyone here investigated of the kind of wallets used by an Exchange.

My understanding is based on what Google gives me on its SERP. I never found out, what kinds of wallets are used and how they are used.

I am aware that exchanges use a combination of hot and cold wallet. I am still on the process of learning. Is it possible for someone in this forum make me understand first what is hot & cold wallet and then how it function on an exchange.

Thanks.

PS: Please ignore my typo and sentence mistake

Topic: What kind of Wallets are used by an Exchange? - page 2. (Read 233 times)