How does exchanges generate addresses

[ThisManIsTesting]

Hello Everyone,
I was wondering which method do big exchanges like binance, bitstamp, bitfinex ... generate bitcoin addresses, or any other altcoins addresses in mass for their users.
Possibly through a wallet installed in VPS then rely it to the website with json rpc as API ?

Regards,
ThisManIsTesting.

[Colorblind]

Hello Everyone,
I was wondering which method do big exchanges like binance, bitstamp, bitfinex ... generate bitcoin addresses, or any other altcoins addresses in mass for their users.
Possibly through a wallet installed in VPS then rely it to the website with json rpc as API ?

Regards,
ThisManIsTesting.

My guess is they create proprietary wallet that generates addresses en-masse once (like 10 millions of adresses). Then they can simply pick any address and assign it to user permanently.

[HeRetiK]

Hello Everyone,
I was wondering which method do big exchanges like binance, bitstamp, bitfinex ... generate bitcoin addresses, or any other altcoins addresses in mass for their users.
Possibly through a wallet installed in VPS then rely it to the website with json rpc as API ?

Regards,
ThisManIsTesting.

I guess most exchanges use some sort of hierarchical deterministic wallet as defined by BIP0032:

https://github.com/bitcoin/bips/blob/master/bip-0032.mediawiki

Hard to say though whether they use their own homebrewn implementation or base it on one of the existing implementations. Both approaches have their up and downsides, so this will likely differ from exchange to exchange and their respective tech stack.

[monkeydominicorobin]

Hello Everyone,
I was wondering which method do big exchanges like binance, bitstamp, bitfinex ... generate bitcoin addresses, or any other altcoins addresses in mass for their users.
Possibly through a wallet installed in VPS then rely it to the website with json rpc as API ?

Regards,
ThisManIsTesting.

They don't generate addresses themselves they make use of api most of the time.

[patt0]

I'm actually more concerned about how exchanges uses their addresses instead on how they create them.
For instance I keep hearing that exchanges don't batch transactions, and because of that they spam the network and contribute for the high fees. I know they are lower now, so maybe they started doing this?

Also I hear coinbase had a few addresses that has to many outputs (transactions made). I don't know how exactly this influences the fees value, but I know it does, and basically those addresses were unsustainable, meaning that the cost they would pay to transact any amount of BTC that was in that address would generate a fee larger than the BTC being transacted.

How do they manage this? And are you aware of more exchanges having these problems?

[HeRetiK]

I'm actually more concerned about how exchanges uses their addresses instead on how they create them.
For instance I keep hearing that exchanges don't batch transactions, and because of that they spam the network and contribute for the high fees. I know they are lower now, so maybe they started doing this?

[...]

If I remember correctly Coinbase has been the only major exchange that didn't batch transactions for a long time. I think they fixed it by now, but I'm not sure.

[ThisManIsTesting]

I guess most exchanges use some sort of hierarchical deterministic wallet as defined by BIP0032:
[...]

Well You think they're using a the bitcoin core to generate addresses ?
About replies mentioning APIs, look at binance they've multiple coins so maintaining APIs will be definitely hell.

Still looking for a more accurate answer.

[achow101]

Well You think they're using a the bitcoin core to generate addresses ?

Using BIP 32 does not mean that they are using Bitcoin Core.

IIRC Bitfinex, Bitstamp, and Kraken use BitGo to store their Bitcoin. They interact with Bitgo via an API. Other exchanges may be doing the same. They may also be rolling their own wallet software. Some may also be using Bitcoin Core.

Some exchanges also use Armory to store their Bitcoin.

Presumably when you request an address, you send a request to the web server which then sends a request to some other server which has the addresses to get the address that it then serves to you.


How exchanges are actually setup is generally not known to people outside of the exchange. This sort of security critical infrastructure is not revealed to the public so that they can get some security through obscurity.