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So hear me out. I understand exchanges have hot/cold wallets and mostly use their hot wallets. But at some point they need to send crypto from their cold wallet to their hot wallet.

Who does this? The CEO & only the CEO? Technically whoever holds the password to these keys could send it to any address and it not be retrievable. The person would be in a lot of trouble but the crypto would probably be unobtainable.

Even if that crypto is "insured" the insurance company would probably only be able to payout in fiat.

Basically, how do exchanges keep your crypto secure?

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    I would imagine some sort of multisig arrangement for the cold storage and employees only have access to the hot wallet. Similar to how bank employees get a cash drawer; they could run away with the cash, but it's not enough for it to be worth going to jail.
    – m1xolyd1an
    Commented Mar 16, 2021 at 3:11
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    Voting to leave this open. While the details of actual setups are likely speculation, there are useful technical answers about what approaches are possible to mitigate risks.
    – Pieter Wuille
    Commented Mar 16, 2021 at 7:21
  • Related: bitcoin.stackexchange.com/a/105889/5406
    – Murch ♦
    Commented May 15, 2021 at 11:48

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Nice question. I assume the following:

  • Most of the funds are stored in "Cold wallets".
  • All the transactions are made from "Hot Wallets"
  • There is an automatic system that detects that the hot wallets need to be recharged.

I don't think such operations are made by a human. Maybe there is a human who checks such transactions. But everything is done automatically.

We can also assume that the CEO has access to the keys and funds. But we will never be 100% sure. It's crypto. That's why different decentralized platforms like UniSwap are popular right now.

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