What is a deposit hot wallet?

Created by Muskan Bhandari, Modified on Wed, 3 Jan at 11:59 AM by Muskan Bhandari

Whenever a new user signs up on the platform, the platform assigns a wallet address to their account. The user can fund their account by sending crypto assets to this wallet address, which is connected to the exchange’s deposit wallet. Deposit wallets can only receive inbound transactions and the exchange periodically initiates the “sweep” function to transfer all the accumulated funds to cold wallets for safe custody.

Hot Wallets Can Be Compromised!

While hot wallets are necessary for the smooth functioning of an exchange or a trading platform, they also present a considerable risk to the safety of funds held in them.

A few common vulnerabilities of hot wallets include:

Code Vulnerability Exploits
Phishing and Spoofing Attacks
Insider Threats

Top best practices to reduce risk and threats:

Ensure that no more than 5% of the total funds are stored in the hot wallets at any given time
Store excess funds in cold wallets
Subject the hot wallet codes to periodic stringent security audits
Implement specialised hardware and software-based information gateways

Managing transactions on the hot wallet may require manual intervention involving company representatives or employees.

This can lead to key leakage and in some cases the account to be compromised.

Liminal Deposit Wallet helps platforms plug the gaps in their refill process through automation.

Why do you need Liminal’s Deposit Hot Wallet?

If you are looking to automate your hot wallet refill process without compromising security, Liminal will help you.

Platforms implementing Liminal’s solution are able to enjoy the benefits of automation while retaining complete control over the process.

Benefits of Liminal Deposit Hot Wallet

Automated Sweeping
Liminal helps you set up an automated sweeping mechanism from your hot wallet to your pre-authorized cold wallet. This saves you time and reduces the manual errors

Transaction Consolidation
Using proprietary solutions, Liminal Hot Wallets come with automated consolidation for UTXO-based protocols such as Bitcoin. This helps to group multiple UTXOs in one, which results in reduced gas fees for the organisation
Automated Spraying
Liminal Hot Wallets come with automated spray for EVM-based protocols such as Ethereum. For EVM-based protocols, you need protocol assets (such as Ether in Ethereum ) even if you want to transfer token assets. The spray function monitors incoming deposits on Hot wallets and sends required protocol assets to addresses as required gas to make it easier to sweep and transfer
Gas Station
Hot Wallets comes with a Gas station which handles fee management. Gas stations also track your sent transaction and in case they get stuck it automatically adjusts the fee and broadcasts again.

At Liminal, we are committed to providing you with a seamless and user-centric staking experience.
If you have any questions or require assistance, please do not hesitate to reach out to our dedicated support team here: support@lmnl.app
Your success is our priority.