Where do exchanges store the coins? Private per customer or combined?

[GekkeBelg]

Hello,

I have been wondering this for a while:

when I deposit coins into an exchange such as Coinbase or Kraken, then do they store my coins in my own private wallet or is it held in a big general wallet?

In other words: can anyone who has seen at least 1 transaction related to my Coinbase-account, therefore see my balance I am holding at Coinbase? Or is this not possible to see since Coinbase/Kraken store my coins in one big general wallet which has all coins of their customers stored in it (or several big wallets at least)?

Hope anyone knows this.

[Heisenberg_Hunter]

You could classify cryptocurrency exchanges into two types : Centralized and Decentralized

A decentralized exchange such as IDEX, never move your funds to cold wallet but a centralized exchange does. For example if you consider exchanges like Binance or coinbase, whenever you send btc to the address associated with the exchange wallet, the coins first moves to the address which you have sent and from there to the cold wallet of the exchange. Here the front end of the exchange or simply the database of the exchange plays a vital role in updation of your balances. Even though the coins were moved to another wallet which is specifically a cold storage, the exchange displays you hold bitcoin in your account.

When you sell btc to another account through a limit order, the balance associated with your account gets changed and the exchange account which bought your coin gets updated in the exchange balance book. Here there is no onchain transaction taking place and such transactions take place only when you initiate a withdraw from your exchange account.

In other words: can anyone who has seen at least 1 transaction related to my Coinbase-account, therefore see my balance I am holding at Coinbase?

No they cannot since the coins move to a larger cold wallet and wouldn't be associated with your account when seen through explorers. Hence you are the one who could see the balances which are updated in front end system of the exchange.

[GekkeBelg]

Excellent and clear answer! Thanks!

[bitmover]

In other words: can anyone who has seen at least 1 transaction related to my Coinbase-account, therefore see my balance I am holding at Coinbase?

No they cannot since the coins move to a larger cold wallet and wouldn't be associated with your account when seen through explorers. Hence you are the one who could see the balances which are updated in front end system of the exchange.

I am not enterily sure about this
Maybe if the transaction is considered small value according to their internal policy, your funds may remain in that same address you transferred for a long time.

I never used coinbase, but I know certain exchanges do not generate new addresses for new transactions. So if someone discovers a transaction you made, they could watch how much you sent there.

Additionally, you should ways create new addresses before withdrawing funds, to preserve your privacy. (Someone who knows one address of yours will not be sure about this second one, and it could be someone else's.

[o_e_l_e_o]

Yeah, the answer to that last part depends partly if we are talking about deposits or withdrawals, and how much trading is being done.

With Coinbase, withdrawals always come from their main centralized wallet, so there is zero link between the address that you are withdrawing from and your own account. If you withdrew from Coinbase, and someone else saw the transaction, they could tell nothing about your account.

With deposits, it depends on whether you keep depositing to the same address or a different one each time. If someone knows your deposit address and you keep using it, they will be able to see all the deposits you make. They won't, however, be able to see any of you trades to fiat or other altcoins, and they won't be able to see any of your withdrawals, so they won't know your account balance.

The bottom line is no one else can ever know your account balance solely from blockchain records, but they might know your total deposits if you don't use different addresses each time.

[figmentofmyass]

when I deposit coins into an exchange such as Coinbase or Kraken, then do they store my coins in my own private wallet or is it held in a big general wallet?

i'm actually curious how kraken does it since they offer margin trading, to USA traders no less.

the CFTC fined bitfinex in 2016 for failure to deliver BTC from financed/margin transactions to the actual owners:

The Order finds that from April 2013 to at least February 2016, Bitfinex permitted users to borrow funds from other users on the platform in order to trade bitcoins on a leveraged, margined, or financed basis. The Order also finds that Bitfinex did not actually deliver those bitcoins to the traders who purchased them. Instead, Bitfinex held the bitcoins in deposit wallets that it owned and controlled, the Order states.

this is what led them to create a bitgo setup where each user account was "segregated" and held the exact amount of bitcoins owned by the account holder. so in mid 2016, if you knew an account holder's exchange/margin/lending deposit addresses, you could see exactly how much was in their account.

unfortunately, in addition to these privacy issues, the bitgo setup had serious security lapses. the entire BTC storage was basically a hot wallet, and bitfinex ended up getting hacked for 120k BTC shortly after.......

[alyssa85]

In other words: can anyone who has seen at least 1 transaction related to my Coinbase-account, therefore see my balance I am holding at Coinbase?

No they cannot since the coins move to a larger cold wallet and wouldn't be associated with your account when seen through explorers. Hence you are the one who could see the balances which are updated in front end system of the exchange.

I am not enterily sure about this
Maybe if the transaction is considered small value according to their internal policy, your funds may remain in that same address you transferred for a long time.

In my experience they don't leave coins in depositing addresses for long. They usually sweep them up daily and transfer them to one of their cold wallet addresses.

[Heisenberg_Hunter]

...snip...

@bitmover @o_e_l_e_o What you both are saying are very much true I guess. There might be different policies for various exchanges, but for majority of the time I have seen small bitcoin/crypto holdings don't move up to the cold wallet. Well I might even be wrong with this, but last week I deposited a minor amount of 0.005BTC for exchanging them with USDT in one of the popular exchanges and further sold them in the process. I have the holdings now in USDT, but after exploring the balance of the deposit address in an explorer the BTC didn't move out of the address but the balance of my account should have been changed in the exchange database!

A exchange can have one single wallet but multiple different addresses assigned to various exchange users. So probably there should be a threshold of the btc amount which gets moved out of the hot wallet.

P.S I am little confused on the deposit address allocation by the exchanges to users. Does 2 different users at 2 different time frames (3-4 months interval) gets allocated the same deposit address? I firmly believed this was the true and a made a post regarding the same, but many forum members disagreed with me! But after recently checking my exchange deposit address, I was allocated a deposit address which was used for a 1+ BTC transaction 3 months back.

[o_e_l_e_o]

Well I might even be wrong with this, but last week I deposited a minor amount of 0.005BTC for exchanging them with USDT in one of the popular exchanges and further sold them in the process. I have the holdings now in USDT, but after exploring the balance of the deposit address in an explorer the BTC didn't move out of the address but the balance of my account should have been changed in the exchange database!

I'd fully expect the exchange to sweep that to a central wallet at some point, but it could well be that they are simply waiting until they have the maximum number of inputs which will fit in a single transaction to maximize their savings on fees, or even waiting until the mempool is empty and fees will be low. It's highly unlikely they are going to pay someone else's withdrawal from an input so small, especially considering that's probably approaching the minimum withdrawal limit for many exchanges, and the change would need consolidated anyway.

Does 2 different users at 2 different time frames (3-4 months interval) gets allocated the same deposit address?

For reasons of not mixing up different customers' deposits as well as privacy they shouldn't, but that's not to say some exchanges don't do it.

[enhu]

You can trace your BTC if you send it to the wallet you have in the exchange and then look it up to the explorer, if your coin is there inside your wallet then its not more to their cold wallet. Centralize exchange often send it to their cold wallet and this is for the security since we don't own the wallet itself that is why we don't have the privatekey when our BTC is in the exchange. I have been in Kraken for a long time as well and I know its on their cold wallet.

[bitmover]

P.S I am little confused on the deposit address allocation by the exchanges to users. Does 2 different users at 2 different time frames (3-4 months interval) gets allocated the same deposit address? I firmly believed this was the true and a made a post regarding the same, but many forum members disagreed with me! But after recently checking my exchange deposit address, I was allocated a deposit address which was used for a 1+ BTC transaction 3 months back.

I think it depends on exchange policy. Also, there is no guarantee that this specific address is yours and yours alone .
An exchange may decide just to use an old address to you, which belonged to some other account before , or even some other transaction from cold -hot storage.