What kind of Wallets are used by an Exchange?

[touseefahmad1999]

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
 
  

Exchanges usually have their own built-in wallets that are used to store the cryptocurrencies traded on their platform. These wallets are often referred to as "hot wallets" because they are connected to the internet and are more vulnerable to hacking attempts.

Some exchanges also offer users the option to use their own external wallets, which are typically more secure and provide users with full control over their private keys. These external wallets are called "cold wallets" because they are not connected to the internet and are therefore less susceptible to cyber attacks.

It's important to note that each exchange has its own policies and procedures regarding the storage and security of cryptocurrencies, so it's essential to do your research and understand the risks associated with using a particular exchange and its wallet system

[Rexlus]

While you can save your cryptocurrency in a wallet, you don’t have perfect control of the wallet as long as your currency lean on both private and public clue.

 An exchange allows easy addminance to all crypto account details.

 choice to save Bitcoin on an exchange or in a wallet is purely a personal choice. However, saving your Bitcoin on an exchange could see you elude all your digital currency if the exchange is cut down or if the owners traded the currency and ran off.

[Peanutswar]

The exchange uses two wallets I guess because the currently active users have their hot wallet to make a received and make send for the users for their withdrawal, this must be active as always because the number of users always make a transaction, and the cold wallet is the reserved asset for the possible lack of the hot wallet I don't quite sure if they make a program at the same time that the cold wallet automatically refill a hot wallet once its already near to its limit but well its their algorithm, and also those known exchange are using different layer of security for their verification to preventing losing amount of money for each transactions.

[Ayebabara]

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.

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.

Not all the exchange wallets work in bitcoin wallets. So if you want to transfer coins to bitcoin wallet, you have to use bitcoin address wallet to send the coins if not it won't work. What think he is trying to say is that the hot and cold walls t
Are well secured with encrypted and decrypted.

[Smack That Ace]

The exchange uses two wallets I guess because the currently active users have their hot wallet to make a received and make send for the users for their withdrawal, this must be active as always because the number of users always make a transaction, and the cold wallet is the reserved asset for the possible lack of the hot wallet I don't quite sure if they make a program at the same time that the cold wallet automatically refill a hot wallet once its already near to its limit but well its their algorithm, and also those known exchange are using different layer of security for their verification to preventing losing amount of money for each transactions.

Thinking with you, they use hot wallets to serve the deposit and withdrawal of users. Since there are not only bitcoins, but there are so many different tokens that hardware wallets hardly support, it is imperative that they use hot wallets to provide users in that case. They will use cold wallets to store larger assets and only use them when hot wallets lack liquidity. But I think the company's employees will do the asset transfer, they don't use algorithms or bots. Most major exchanges have a very large number of employees to serve many different stages, they operate like a traditional company.