Why do wallets of Bitcoin exchanges have tens or hundreds of thousands of addresses?

Question

I am looking to track the wallet of Kraken and see how the balance changes at each block.

For that purpose, I use www.walletexplorer.com (https://www.walletexplorer.com/wallet/Kraken.com/addresses) and I can have access to all the addresses of Kraken's Wallet. For now we can see that there are 114 458 addresses.

My questions are:

1. Is that number fix ? (I doubt so)
2. What those addresses represent exactly ?
3. Why do we find so many addresses but only around 20 of them are rich? (others are very close to 0)

I imagine it like every customer of Kraken is associated to one address (so that's why we find so many addresses) and all these addresses are managed/held by Kraken. But I am note sure.

Thank you for enlightening me.

Answer 1

Is that number fix ?

It isn't. New addresses are generated by exchanges all the time.

What those addresses represent exactly?

They are simply multiple addresses controlled by them. They can represent addresses the users deposit coins too (often one per currency, so BTC and USDT may have separate addresses), or intermediary addresses used for consolidation, or hot wallets, or cold wallets, or temporary addresses used as change addresses.

Why do we find so many addresses but only around 20 of them are rich?

In general, exchanges tend to have thousands of user addresses, into which users send crypto. Exchanges will then move all that crypto to a handful of hot and cold wallet addresses, which they will then use to process use withdrawals. The majority of addresses will be empty most of the time, unless you happen to check one between the user depositing coins and the exchange sweeping it to a consolidation wallet.