What is a Smart Refill Wallet?

Created by Muskan Bhandari, Modified on Wed, 3 Jan at 11:32 AM by Muskan Bhandari

Before we dive into Liminal Smart Refill Wallet, let us understand the importance of refill wallets for crypto exchanges and platforms. Additionally, we will examine the current challenges these organisations face in maintaining their refill wallets, and explore potential solutions to these issues.

What is a refill wallet and why is it required?

Refill Wallet is a process utilised by centralised crypto platforms to ensure liquidity in their hot wallets for uninterrupted functioning while keeping the security of users' funds in mind. Hot wallets are online wallets used to support deposits and withdrawals on the platform, and their private keys are always connected to the internet. As the private keys of hot wallets remain online, it exposes them to the risk of getting compromised by cyber attacks and hacks. So, exchanges limit the number of funds held in such wallets to a certain threshold, and they keep replenishing these hot wallets from intermediary warm wallets through a refill process to ensure uninterrupted functioning.

Visual representation of a crypto platforms manage their wallets and refill process

What are key challenges faced by Crypto Platforms with their existing refill process?

Insufficient funds in hot wallet: Shortage of funds causes customers to miss out on trades, resulting in a negative customer experience. If this issue persists, customers may switch to competitor exchanges
Time-consuming process: Manual wallet refills are a resource-intensive task involving a series of complex steps, causing delays in refilling and disrupting services.
Inefficient use of manpower: Volatility of crypto assets makes it hard for exchanges and crypto platforms to predict customer demands, requiring the team to be available around the clock to fulfil any unforeseen demand at any time.
Increased chances of mismanagement: Mismanagement of wallet keys or funds due to human errors or omissions during the fund transfer process may seriously threaten the security of the funds and ultimately the platform.

Presenting Liminal Smart Refill Wallet

Liminal Smart Refill Wallet is a innovative solution that helps exchanges and other trading platforms to automate their hot wallet refill process, secure their assets and plug certain loopholes that induce vulnerabilities to the process.

How does a Liminal Smart Refill Wallet work?

The Liminal Smart Refill solution replaces the warm wallet with a Smart Refill wallet to act as an intermediary between the crypto platform’s cold and hot wallets. It provides a customisable multi-signature wallet application that works exclusively with one hot wallet and only supports HSM-based transactions to eliminate security vulnerabilities.

Visual representation of how Liminal Smart Refill Wallet works

Transactions are partially signed in advance by authorised signatories to enable automated wallet refills.
The partially signed transactions will include m-1 signatures, with the Liminal system holding and operating one of the private keys as a final signing authority to successfully execute the transaction.
Each Smart Refill Wallet can interact with a single pre-approved hot wallet.
The Smart Refill Wallet continuously monitors the status of the connected hot wallet and initiates refill whenever the liquidity falls below the predefined threshold.
Refill policies are defined in advance to ensure that the refill is executed in compliance with the pre-defined parameters.
Once the hot wallet conditions satisfy the pre-defined parameters, the refill is executed by signing off partially signed transactions using the Liminal key.
Platforms can set the wallet refill parameters, including the number of refill transactions, the amount per each refill transaction, the threshold limit in a hot wallet to initiate a smart refill, and the cooldown period between each refill.
The Smart Refill wallet also offers a "Push" feature that allows the platform's team to manually override automation to conduct forced refills ahead of schedule in extraordinary circumstances.

Schedule Smart Refills with Ease: Key Parameters to Keep in Mind

Experience hassle-free and secure hot wallet refills by easily customising and setting up the Smart Refill Solution as per your specific needs.

Amount for each refill: Define the total amount of crypto assets to be transferred during each refill to create refill batches with the exact amount of crypto assets to be transferred from the Smart Refill Wallet to the specified hot wallet.
Occurrence: Decide the number of transactions to be included in each batch for pre-approval in the refill ceremony. The resulting pre-signed transactions will be later signed by Liminal Signer to initiate transfer of funds from the Smart Refill Wallet to the associated hot wallet.
Cooldown: Specify the minimum interval between two consecutive hot wallet refill actions. The Smart Refill Wallet will ensure that subsequent refills are executed only after the stipulated duration is completed.
Whitelist: Associate each Smart Refill Wallet with only one hot wallet and whitelist the respective hot wallet address on the Liminal Smart Refill system to be able to receive funds from the designated Smart Refill Wallet.
Trigger Amount: Set a trigger amount to activate the Smart Refill system to initiate the refill process. The Smart Refill system will send a predefined refill amount from the Smart Refill Wallet to the hot wallet whenever the balance reaches or falls below the trigger amount.

Benefits of Implementing Liminal Smart Refill for Crypto Platforms:

Predictable refills ensure uninterrupted service delivery to customers with periodic liquidity provisioning to hot wallets.
Guaranteed on-time refills with transaction confirmation guarantees and automatic follow-up attempts to address any transaction failures.
Manual override options to maintain control over automated refill operations through push refill and schedule modification options.
Constant updates through email and SMS channels keep the relevant heads of the organisation and authorised parties updated about the refill status.
Improved security by limiting the exposure of assets in hot wallets and increased control over the movement of assets from cold to hot wallets.
Enhanced customisation by setting up the wallet refill parameters according to specific requirements.
Overall, it provides a powerful and flexible tool for crypto platforms to manage their assets securely and efficiently.