If you have a online site that accepts bitcoin deposits and users can withdraw their balance, Is it possible to have the deposits go to the watch-only address of a cold storage and the withdraws come from the hot wallet?
If yes, then basically I'll have to give a programmer my private key for the hot wallet and just the master public key for the watch only-address on the server. Am I correct?
The Answer is No, you can not do this. Reasons are below.
It seems you may be confused.
The point of a cold wallet it to store the coins offline, adding a watch-only address to a cold wallet does nothing, other then letting you see that address.
(I could add your address as a watch-only and see your balance as well, but that doesn't give me access to your coins)
If the coins are in the cold wallet then you have to send them from there, generally by creating and signing an offline transaction.
If they are in the hot wallet (even if being watched by the cold wallet) they you can send them from the hot wallet.
I know that this is an older question, but I still wanted to take the time to answer it in case any other folks look this up.
To start with, you don't have to give your private key to a programmer in order to implement a deposit address (which is what you're describing here).
With BIP32, you can actually give someone a 'child' public key, which they can then use to generate additional public keys on your behalf without needing to have the associated public key on hand.
This illustration from 'Mastering Bitcoin' exemplifies this visually for you:
In terms of signing, you could set up a JWT-esque script for the relay of your transaction:
If the transaction has already been serialized, then all that's needed is for you to sign that serialized transcation.
The last check should probably be a verification on your end that recreates the transaction w th8e same parameters to ensure the ID's match up (if there is no match, there should be a fail). Once that passes, one last check to ensure that the amount is below the threshold of "alert" should be done (i.e., to make sure someone isn't attempting to withdraw > $1 million).
Not sure what a 'watch-only' address would be necessary for - but you could probably scrap that part of the idea entirely. There are plenty of tools, APIs, etc., that can be used for you t
