Why Every Platform Needs Liminal’s Hot Wallet Refill Solution?

| November 17, 2023

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Liminal’s Hot Wallet Refill Solution

We have been witnessing the rising crypto adoption, which has created an increased demand for crypto exchanges and trading platforms, enabling them to handle record volumes. The increasing volumes and gradually appreciating value of these assets make crypto platforms attractive targets for cybercriminals.

Having recognized the constant threat they are always under, crypto exchanges and trading platforms are increasingly focusing on security. However, increased security comes with a trade-off, which is convenience. One such convenience is the ability to support quick transfers, which is important for traders as well as regular crypto users. As a result, the platforms have taken a balanced approach by setting up a combination of hot and cold wallets as part of their infrastructure.

Cold wallets are the most secure crypto storage solution, completely isolated from the internet only to connect momentarily whenever a transaction has to be made. Whereas hot wallets always remain online to enable nearly instantaneous transactions. The design of hot wallets makes them vulnerable to a range of cyber threats, which, if exploited, can result in the loss of funds stored in them. As a result, platforms tend to use elaborate measures to limit the funds available in those wallets at any time without impacting the operations.

Read more about Hot and Cold Wallets.

How are Hot Wallets Secured?

Today, most platforms maintain no more than 5% of the total funds in their custody on hot wallets, the remaining will be securely held in cold wallets. They organize wallet refill teams to maintain a constant supply of funds to cater to user demands. The wallet refill team’s job is to monitor the liquidity in hot wallets and replenish it whenever the levels fall below a certain threshold. They usually have complete access to the hot wallets as well as intermediary warm wallets used to replenish the hot wallets to maintain liquidity levels. Meanwhile, the top executives and other trusted parties control the cold wallets used to secure most of the platform’s assets. Warm wallets usually receive funds from the cold wallets, while in some cases, the platform may also choose to divert a portion of received user deposits directly to these warm wallets as well.

Additional Vulnerabilities in the Name of Security

The practice of maintaining limited reserves in the hot wallet requires the wallet refill team to constantly monitor the liquidity levels. Further, the volatility associated with the crypto markets makes it virtually impossible to predict withdrawal demands from the users, thereby forcing the refill teams to be always on their toes. They should be prepared to execute transfers from warm wallets to hot wallets as and when the liquidity reduces below the designated threshold.

The number of hot wallets and associated warm and cold wallets are usually proportional to the total number of assets supported by the platform. Maintaining them requires a significantly large refill team, amounting to exorbitant operational costs and manpower that could be otherwise put to use for other purposes.

A large team also gives rise to additional risk in the form of human errors, maleficence, and greed. The more people managing a handful of wallets, the lesser their accountability will be, especially with the circumstances that at many times may require access credentials and private keys to be shared with multiple people. Such practices also make the team members susceptible to hacking and phishing attacks that could lead to compromised credentials or confidential information.

So, in a nutshell, the current safeguards in place to mitigate the hot wallet-associated risks themselves end up introducing more vulnerabilities to the platform.

Need for an Economical, Safer Alternative

The straightforward method to further enhance the safety of assets across any crypto platform’s wallet infrastructure is by implementing advanced security features while reducing human involvement to a bare minimum. This goal can be achieved to a great extent by automating the hot wallet refill process. However, such automation solutions should also enable platforms to maintain complete control over the system at all times, allowing for manual interventions and changes in parameters as and when needed.

The need for the hour is an automated, secure hot wallet management solution that doesn’t compromise on the platform’s autonomy. Liminal has answered the call for such a solution with the Smart Refill.

How does Liminal Smart Refill help?

The highly customizable Liminal Smart Refill solution for hot wallet management supports ready integration into a platform’s existing wallet infrastructure. Liminal’s Smart Refill Wallet takes the place of a warm wallet to constantly monitor and conduct periodic refills according to parameters set by the platform’s refill policies.

Advantages of using Liminal Smart Refill Solution for the platforms include:

  • Enhanced Security

The Liminal Smart Refill solution makes use of multisig Smart Refill Wallets enabling the platforms to assign transaction signing credentials to multiple people to ensure redundancy of operations. The involvement of multiple people in authorizing transactions enhances accountability, eliminates single points of failure arising due to compromised private keys, and ensures continuity of operations even in the absence of one or more key holders.

The transaction signing process is carried out in batches known as Refill Ceremony. The authorized signatories can pre-sign refill transactions with their HSM-enabled devices in advance at their convenience. The compulsory use of hardware wallets for signing provides additional security, while the Refill Ceremony reduces the possibility of all the associated keys simultaneously getting exposed at any given time. Meanwhile, the Smart Refill Wallet retains one signature to be used to complete the signing process only at the time of refill.

Further, each Smart Refill Wallet is exclusively paired to one hot wallet through a whitelisting process. It effectively eliminates the possibility of fund transfers to any other wallet apart from the one confirmed to be owned and operated by the platform.

  • Seamless, Uninterrupted Refill Process

The Smart Refill Wallets operate based on the refill parameters specified in advance by the platform. Whenever the conditions in terms of refill frequency or minimum wallet liquidity threshold value match the declared parameters, the Smart Refill process will be initiated automatically.

Using intelligent algorithms, the Smart Refill Wallet guarantees on-time refill transaction confirmation by setting optimal gas fees and initiating follow-up attempts whenever necessary. It keeps the wallet management team constantly updated with alerts regarding the hot wallet status and actions initiated by the Liminal Smart Refill solution. If the hot wallet balance were to fall below the threshold while the Smart Refill Wallet is in the middle of a cooldown phase, the system would alert the team to initiate a one-time manual override to initiate a forced refill.

  • Flexibility and Control

The Liminal Smart Refill solution is a Plug-and-Play solution that requires minimal changes to existing wallet infrastructure and operational workflow. As a highly customizable solution, it allows the platforms to set refill parameters in accordance with their refill policy. The refill settings, once in place, can be updated at any time by the administrator after completing certain security verification steps.

The manual override option ensures that the operator is always in control of the automated wallet refill solution as well as the funds handled by the Smart Refill Wallet.

  • Efficient Use of Resources

Apart from reducing the manpower requirements for hot wallet refills using Smart Refill Wallets, Liminal also encourages efficient utilization of funds by the platform. The Smart Refill Wallets don’t require the entire liquidity matching the value of pre-signed transactions to be locked on the platform. Instead, platforms can ensure the availability of sufficient liquidity to satisfy immediate refill needs and put the rest of EVM-based assets to other uses.

Alternatively, platforms can also choose to divert a portion of the funds received in their deposit wallets to fund the Smart Refill Wallet instead of accessing cold wallets for liquidity. Such a practice will introduce some sort of predictability in terms of funds availability, reduce the number of transactions from cold wallets and help in decision-making processes.

Make Your Operations Stress-Free

The Liminal Smart Wallet Refill solution provides a safer and more efficient automation solution for crypto platforms to improve their operations. By minimizing manual intervention in the wallet refill process and implementing additional layers of security without many changes to the existing infrastructure. With Liminal’s solution in place, they can carry on with their business as usual while pocketing some extra change in the form of savings.

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More on Crypto

As we continue constructing a fully regulated digital asset custody platform, ensuring secure storage for both crypto and fiat assets remains a critical priority. 

To facilitate the last checkpoint of enabling institutions to convert their digital asset treasury into fiat currency, we’re expanding beyond pure wallet infrastructure and integrating seamless fiat off-ramp capabilities for our partners.

We’re thrilled to announce our partnership with Encryptus, licensed and compliant off-ramp solutions tailored for institutional clients. This collaboration elevates Liminal’s service offerings by empowering our partners to convert their digital asset treasuries into fiat currencies efficiently.

Integrating A Seamless Off-Ramp Solution

The digital asset ecosystem historically faced friction points when transitioning between fiat and cryptocurrencies. Off-ramp solutions address this pain point by enabling efficient and streamlined conversion between asset classes, minimising value loss and simplifying compliance processes.

Here’s how off-ramp changes the game:

  • Reduced Friction: Frictionless conversion minimises delays and operational complexities associated with traditional fiat-crypto exchange methods.
  • Enhanced Efficiency: Streamlined workflows expedite asset conversion, increasing speed and cost-effectiveness for institutional and individual users.
  • Optimised Value Preservation: Advanced off-ramp solutions prioritise minimising price slippage and value loss during conversion, protecting user portfolios.
  • Simplified Compliance: Integrated compliance features navigate regulatory complexities, ensuring adherence to relevant financial regulations.

With our partnership with Encryptus, we have embedded their institutional-grade APIs, connecting their off-ramp solution within Liminal’s wallet and custody platform. 

This integration simplifies our clients’ liquidation requirements while keeping their assets secure and more:

  • Effortless Digital Asset to Fiat Conversion: Our partners will be able to access treasury management and facilitate business payments in 54 countries and individual payments in an extensive network of 80+ countries.
  • Streamlined Compliance and Regulation: Our partners will be able to leverage Encryptus’s rigorous licensing and compliance framework, ensuring adherence to stringent financial regulations.
  • Enhanced Platform Value: We will be able to expand the functionality of the Liminal custody solution, attracting institutional users seeking comprehensive digital asset management capabilities.

Moving Towards A Robust Off-Ramp Partnership With Encryptus

The partnership between Liminal and Encryptus earmarks a significant step forward in secure digital asset custody, representing a shared commitment to pushing compliant practices while supplying institutions with easy access to convert their digital assets to fiat. 

For Encryptus, the opportunity to integrate with Liminal’s established platform presents a chance to reach a wider audience and scale their innovative off-ramp solutions to new heights. By streamlining fiat conversion within Liminal’s secure custody infrastructure, Encryptus gains access to a trusted network of institutional users seeking seamless and compliant treasury management.

For Liminal, this collaboration reinforces our dedication to partnering with companies that demonstrably prioritise clear governance and robust policy frameworks. By aligning with Encryptus’s stringent compliance standards, we reaffirm our commitment to building a secure and sustainable future for digital assets, where trust and regulatory certainty go hand-in-hand.

January 22, 2024

Hello world, it’s that time of the month when we share the biggest security breaches in the world of Web3 through our Security and Regulatory Newsletter. 

Liminal believes in optimizing security and custody practices globally across the Web3 industry. Through our Newsletter, we highlight security, regulations, and compliance incidents that have happened in the past month and how one can follow better Security practices to safeguard their digital assets. 

We will also highlight regulatory changes that might have happened globally, which were significant to the overall ecosystem.

Dive in and get a detailed analysis of everything security and regulation in the domain of web3 with Liminal’s Monthly Security and Regulatory Newsletter.

Web3 Security Compromises in January

Abracadabra exploited for almost $6.5 million, Magic Internet Money stablecoin depegs

The Magic Internet Money ($MIM) stablecoin has lost its dollar peg again, dipping all the way below $0.77 in a flash crash before returning to around $0.95.

The depeg appears to be related to an exploit of the Abracadabra lending protocol, which allows people to borrow $MIM. An attacker exploited an apparent flaw in the platform’s smart contracts to drain around $6.5 million.

Goledo Finance hacked for $1.7 million

Goledo Finance, an Aave-based lending protocol, was exploited through a flash loan attack. The attacker stole assets estimated by CertiK to be around $1.7 million.

Goledo Finance contacted the attacker to offer a 10% “bounty” for the return of the remaining assets. In a message on January 29, the attacker wrote: “I hacked Goledo and want to negotiate.”

Socket service and its Bungee bridge suffer $3.3 million theft

The Socket cross-chain infrastructure protocol was hacked for around $3.3 million in an attack that exploited its Bungee bridge. The thieves were able to exploit a bug that allowed them to take assets from those who had approved a portion of the system called SocketGateway.

A little over 700 victims were affected, and the highest loss from a single wallet was around $657,000. 121 wallets lost assets priced at more than $10,000.

On January 23, the protocol announced they had recovered 1,032 ETH (~$2.23 million) of the stolen funds.

Web3 Regulatory Practices for January

The EU Imposes Stricter Due Diligence Rules for Crypto Firms

On Jan. 17, the European Council and the Parliament came to a provisional agreement on parts of the Anti-Money Laundering Regulation (AMLR) that now extends to the crypto sector.

Under the new rules, cryptocurrency firms will be required to run due diligence on their customers involving a transaction amounting to €1,000 ($1,090) or more. 

However, the agreement isn’t final yet as it has to be first officially adopted by the Council and Parliament before the rules can be applied.

So, after the EU passed its landmark MiCA regulation last year, which clarified rules about cryptocurrencies, regulators are now targeting the space with tighter controls. 

While these regulations bolster security and trust in the crypto market, potentially attracting more cautious investors and combating financial crimes, they also present challenges. 

The US State of Virginia Introduces Digital Assets Mining Rights

Recently, the Virginia State Senate introduced Bill No. 339, which outlines regulations for the transactions and mining of digital assets and their treatment under tax laws. 

The legislation exempts individuals and businesses engaged in crypto mining activities from obtaining money transmitter licenses. Additionally, it protects miners from any discrimination. 

Issuers and sellers of crypto are also exempted from securities registration requirements if certain conditions are met. Moreover, those offering mining or staking services are not to be classified as “financial investment” but must file a notice to qualify for the exemption.

The bill further incentivizes crypto’s use for everyday transactions by offering tax benefits. Under this, up to $200 per transaction can be excluded from an individual’s net capital gains or gains derived from using crypto to purchase goods or services, starting from Jan. 1, 2024.

Key Takeaways:

  • Hackers continue to exploit vulnerabilities in DeFi protocols and cross-chain bridges, highlighting the need for robust security measures.
  • Regulatory frameworks are evolving rapidly, with stricter AML rules and supportive legislation for emerging technologies like crypto mining.
  • Staying informed about these developments is crucial for navigating the digital assets market safely and responsibly.

Stay #LiminalSecure

These events highlight the constant evolution of Web3 security and regulation. You can confidently navigate this dynamic landscape by staying informed and prioritizing security best practices. 

At Liminal, we’re committed to empowering institutions to unlock the full potential of digital assets without compromising security or compliance norms with our robust custody and wallet infrastructure solutions. Join us on this journey towards a safer, more accessible future for digital assets.

January 15, 2024

Buckle up as we’re about to take a trip down memory lane. 

The year 2023 was a wild ride that showed signs of a plummeting market, groundbreaking innovation and regulatory hurdles. 

Contrastingly, in the same year, we saw no market-shattering crashes. Financial institutions extending an olive branch, key jurisdictions unlocking the doors to blockchain technology. 

Simultaneously, at Liminal, we experienced significant breakthroughs, re-engineering our positioning and becoming a pioneer in digital asset security with bank-grade custody. 

We took major strides this year, right from building comprehensive products to becoming a qualified custodian, from revamping our brand design to expanding our offices in newer locations, from partnering with hyper-local communities to onboarding a diverse set of clients,  we did it all. 

So, let us take you through everything we accomplished in 2023 and what the future holds.  

Liminal Became A Qualified Custodian

One of the prominent moves we made this year was to change our positioning as a regulated custodian from being a wallet infrastructure platform. 

We got two licenses in key jurisdictions to operate as a regulated custodian. 

The first one came from Hong Kong, where we acquired the TCSP license issued by the SFC, which oversees and regulates financial activities to ensure compliance with legal and regulatory obligations. 

Our next license came in the MENA region, where we got In-Principle Approval for the FSP license granted by the FSRA, a governing body in ADGM, to establish a progressive financial services environment. 

Both these licenses paved the way for Liminal to push its wallet infrastructure and offer bank-grade custody to institutions looking to operate in these particular regions. 

Liminal Introduced A Suite of Products & Features

Continuing our building spree, we launched new products and integrations to broaden the existing infrastructure and added more parameters of security, scalability and sustainability. 


Liminal launched staking for institutions to eliminate the risks involved in running staking nodes and the vulnerabilities in hot wallet transfer. 

Hence, we introduced an industry-first mechanism of cold wallet staking to ease staking for institutions and secure assets explicitly.  

Whitelabel Solution

Accelerating the go-to-market time for organisations looking to build a secure and customisable application, Liminal launched its whitelabel solutions

Targeted to help organisations meet security standards, manage assets with maximum control, and add their custom branding to give it a personal touch. Our whitelabel solution is a first-in-class custodian-developed solution for institutional grade custody.

Smart Consolidation

We are building not just secure custody but also automation-based features to eliminate manual errors, increase the throughput of transactions and scale institutional wallets. 

Taking this ahead, we launched the Smart Consolidation feature to automatically calculate all the active addresses and consolidate them into a single address. With this level of automation, managing multiple addresses becomes uber easy for wallet teams. 

Travel Rule 

To limit the use of cryptocurrencies for activities like money laundering and terror financing by regulatory bodies, travel rule was mandated for institutions to follow. 

Continuing the latest compliance integration policy, Liminal partnered with Notabene to introduce Travel Rule, enabling institutions to manage counter-party risk and extend the process of due diligence right from the Vaults dashboard.   

Liminal Accured List Of Security Certifications

Following our ISO certification for data privacy and risk management, we added two new security certifications to fortify our systems and build trust for our clients. 

Liminal Achieves Crypto’s Highest Security Mark: CCSS Level-3 Certified

Cryptocurrency security lacked a gold standard, creating a vulnerable ecosystem. Enter the CryptoCurrency Security Standard (CCSS), setting the bar for auditing and certifying custodian infrastructure and establishing levels of trust and confidence for investors. 

Liminal became only the second wallet infra platform and the first regulated custodian to be accredited with Level-3 certification, deeming wallets, transfer environments, workflows and engines safe and secure. 

Liminal Reciueved SOC 2 Type II Certification

To tackle threats in institutional-grade security, organisations’ SOC has been identified as the primitive compliance standard for service organisations to handle customer data.

Liminal successfully attained SOC 2 Type II certification, validating its setup of security controls & compliance processes to be industry standard. 

Liminal Level Up

Liminal unveiled its most significant platform upgrade ever, revolutionising the future design standard of a qualified custodian. This level-up activity included revamping our website and product UI, giving a completely new look and feel to not “Liminal” but “Liminal Custody”. 

The Liminal level-up activity was a strategic step and the biggest one for us this year to create an intuitive, inviting and tailored experience for our clients. 

Liminal Reached New Borders

We spread out our operations this year, reaching new borders and onboarding a new wave of institutions across gaming, DeFi, HNI wealth, treasuries, and exchanges! From Indonesia and Africa to India, UAE, and Korea, we are setting up custody operations worldwide. 

This isn’t just a roster of clients; it’s a network ready to spark connections, collaborations, and shared success to further the definition of secure assets. 

Liminal Collaborated With Law Enforcement Agencies

The best and the proudest moment of Liminal for this year was when we collaborated with CBI & Himachal Prashesh police department to aid them in seizing digital assets. 

This partnership put us on the map, as we became the first point of contact for LEAs in India, and we standardised the process of secure seizure of digital assets. Leveraging our expertise, we enabled a safe space for officers to learn the basics of custody, contributing to a safer digital landscape.

Team Liminal Grew Bigger

Building such a massive infrastructure, prioritising security and compliance over everything else, we had to grow the team to build at pace and expand at an even higher level. Not only did we grow in team numbers, but we also elongated our footprint to new destinations. 

Team Liminal went from 32 to 70 with 5 new offices in Mumbai, Ahmedabad, Hong Kong, Singapore and ADGM, setting up our custody operations steadfastly. 

What’s To Look Out For In 2024

We are excited to announce that our commitment to integrating the most secure digital asset wallets with a cutting-edge custody platform is swiftly becoming a reality. 

The upcoming year, 2024, will serve as a testament to this transformative journey. Moving beyond self-custody, we are constructing a comprehensive infrastructure encompassing both custodial and non-custodial wallets. Exciting products are set to launch starting from the first week of January, some of which are: 

  • Official Custody Platform Launch
  • Liminal’s Off-Exchange Settlement Hub
  • Secure Custody of Real-World ‘Tokenised’ Asset

The Web3 space has evolved explicitly this year, pushing the narrative of secure digital asset custody and security, introducing new regulations and compliance standards, licensing VASP providers and standardising the use of custodians as a trusted third party. 

At Liminal, we took major strides this year, from building comprehensive products to becoming a regulated custodian, from revamping our brand design to building the full infrastructure of custodial and non-custodial wallets.

January 5, 2024

Find Out How You Can Benefit From A Fully Self-Custodial Wallet Architecture