We are excited to present the new revolution in the crypto industry. An all-around solution that enables crypto platforms to automate processes and secure their assets. Created by a team of industry veterans with first-hand experience in developing and operating cryptocurrency exchanges, Liminal recognizes various issues that currently plague centralized platforms and seeks to address them in an easy, user-friendly way.
Liminal Smart Refill is the first among the long list of products we are planning to introduce in the coming days. With Smart Refill, crypto exchanges and trading platforms can automate their hot wallet refill process and plug certain loopholes that induce vulnerabilities to the process.
The Need for Liminal Smart Refill Solution
The Crypto industry has witnessed tremendous growth in the past few years. As the total market capitalization and the number of crypto users continue to grow, exchanges and trading platforms are now handling millions of transactions each day. These numbers are only expected to grow further, as much of the global population is yet to come on board the crypto wave, which is going to happen sooner than later.
The growing community combined with the appreciation of the value of crypto assets has created a huge user demand, which makes the exchanges work extra hard to ensure smooth functioning while keeping the security of users’ funds in mind. As the number of users and trade orders increase, the platforms find themselves playing catch up, ensuring enough liquidity in their hot wallets to meet withdrawal demands raised by their users. As a result, they are expanding their infrastructure to include the growing number of crypto assets and the workforce to maintain them.
Almost all centralized crypto platforms utilize a similar model to support their operations. It includes a front with order books and trading tools that are paired with a backend involving the necessary database and a robust wallet infrastructure. The wallet infrastructure is a critical component that is responsible for receiving, storing, transmitting, and securing crypto funds.
A Typical Exchange Wallet Infrastructure
Let us look at how a typical wallet infrastructure works on an exchange platform. An exchange usually operates two or three different kinds of wallets to manage crypto funds. Hot wallets, cold wallets, and warm wallets. Hot wallets are used to support deposits and withdrawals on the platform, while the cold wallet stores the bulk of assets in the platform’s custody which includes user funds as well as its own reserves.
The hot wallets are online wallets, with their private keys always connected to the internet. Such a setting enables them to instantly send and receive funds — an absolute requirement to meet trading needs. Exchanges usually allocate a set of two hot wallets for each crypto asset, the deposit wallet and the withdrawal wallet. Deposit wallets generate addresses for each user, using which they can fund their accounts. Meanwhile, the Withdrawal wallet processes all withdrawal requests raised by the user.
As the private keys of hot wallets remain online, it exposes them to the risk of getting compromised by cybercriminals. So, exchanges limit the number of funds held in such wallets to a certain threshold which is sufficient to meet immediate withdrawal demands. They keep replenishing these hot wallets from intermediary warm wallets whenever the liquidity falls below a certain amount through a refill process to ensure uninterrupted functioning. Funds for the refill process will be withdrawn from the platform’s cold wallets, which remain offline most of the time and are considered to be the safest option to store crypto assets. These withdrawn funds are temporarily stored in warm wallets and transferred to the hot wallet as and when necessary. Similarly, funds received into the deposit wallets are also cleared periodically into cold wallets for safekeeping.
Ballooning Risk and Resources
Maintaining these wallets for multiple crypto assets requires a lot of manpower, resulting in bloated refill teams with many people simultaneously managing many private keys. Also, if the demand is high, the wallets need to be refilled more often, which also means multiple withdrawals from the cold wallet to the warm wallet and then to the hot wallet multiple times in a given period. All these factors make the exercise resource intensive while inducing a significant risk of the private keys being compromised either by external actors or those in charge of the process.
The current refill process presents a looming threat over all the platforms, which needs to be addressed as soon as possible to ensure everyone’s interests are protected. The best way to deal with this issue of hot wallet vulnerability is by introducing considerable automation, a certain level of obscurity, and additional layers of security.
Liminal Smart Refill does just that by offering an automated smart refill wallet solution.
Securing the Wallet Refill Process with Liminal
So, how does Liminal Smart Refill Solution 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. The Smart Refill wallet is a customizable multi-signature wallet application that works exclusively with one hot wallet. Platforms can set up the Smart Refill wallet by defining 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.
Once the parameters are defined, authorized representatives of the platform can pre-sign batch transactions in advance using their hardware wallets. As one of the signatories to the transactions, the Liminal Smart Refill wallet keeps monitoring the connected hot wallet and initiates a refill transaction by signing one of the partially signed transactions once the defined refill parameters are satisfied.
With Liminal Smart Refill, exchanges and other crypto platforms can minimize human interaction in the refill process, ensure timely refills and enjoy enhanced key security. To eliminate obvious security vulnerabilities, the Liminal Smart Refill wallet supports only HSM-based transaction signing and hot wallet address whitelisting processes. Further, the batch signing process for refill transactions during the Refill Ceremony can be carried out at any time by the authorized key holders. It eliminates predictability by minimizing the chances of all the private keys being online at the same time or on a particular network or device.
Need of the hour!
Liminal Smart Refill provides automation and additional security to the hot wallet refill process without needing extensive changes to existing infrastructure. It is easy to set up and highly customizable, making it capable of accommodating any existing refill policy. If that’s not convincing, the Smart Refill Solution has been tested and adopted by some of the leading crypto platforms, and they all have only good things to say about Liminal.
So, the right question will be — Is it worth putting your platform’s funds at risk?
Liminal is a self-custodial solutions provider for digital assets across multiple blockchain protocols. Operating with the motto of “Simplifying Self-Custody”, Liminal makes it extremely easy and secure for everyone to manage their digital assets. The platform offers enterprise solutions to facilitate the automation of processes involving the transfer and storage of digital assets.
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