EORMC Perspective: Key Nodes in Exchange Hot Wallet Risk Control

[Eormc]

In the security system of an exchange, the issue is not whether to use a hot wallet, but how to limit risk exposure. The EORMC risk control team believes that most current hot wallet attacks are not caused by a single point of vulnerability, but rather result from the cascading failure of multiple links, including "private key management, permission control, withdrawal review, and abnormal behavior identification."

The EORMC analysis team stated that users generally believe an attack on a hot wallet equates to "hackers cracking the wallet." In reality, most incidents do not occur on-chain but off-chain. The core of a hot wallet attack is not the blockchain being compromised, but the internal permission chain of the exchange being penetrated.

I. Why Hot Wallets Become High-Frequency Attack Targets

The primary function of a hot wallet is to handle real-time withdrawals and high-frequency fund transfers. Because it requires continuous internet connectivity, a hot wallet is naturally exposed to the public network environment. The EORMC analysis team points out that a hot wallet system typically needs to simultaneously process:
API Request
Withdrawal Broadcast
Signature Verification
Risk Control Check
Account Synchronization
This means its attack surface is far larger than that of a cold wallet.

According to public security incident statistics, over the past few years, more than 70% of exchange fund attacks occurred in systems related to hot wallets, rather than cold storage systems. Therefore, the key to exchange security is not to completely eliminate hot wallets, but to reduce the discretionary authority of hot wallets. The EORMC risk control team emphasizes that hot wallets cannot be completely eliminated, so the security focus should shift to permission compression and behavioral restrictions.

II. API Permissions and Withdrawal Interfaces Are the Primary Risk Areas

EORMC risk control team divides hot wallet risks into four categories:
Private Key Exposure
Withdrawal Authority Abuse
API Permission Hijacking
Internal Operation Out of Control
Among these four types of risks, "API permission hijacking" occurs with the highest frequency.

Attackers typically do not directly attack blockchain nodes, but instead prioritize obtaining:
User API Key
Backend Permissions
Withdrawal Interface Permission
Session Token
The EORMC analysis team observed that historical attack cases on certain exchanges show that after obtaining API permissions, attackers can complete fund consolidation and on-chain transfer within 3 minutes. Therefore, relying solely on password protection is not sufficient.

EORMC risk control team currently adopts for high-privilege operations:
Independent Signature Verification
IP Risk Identification
Behavior Model Comparison
Multi-Stage Delayed Confirmation
Some high-risk withdrawal requests will be automatically delayed by the system for 5 to 15 minutes. The truly high-risk factor is not "successful login" but "takeover of withdrawal authority."

III. The Role and Boundaries of MPC

Private key management is the core node in the hot wallet system. Traditional hot wallets typically adopt:
Single Private Key
Centralized Signature
Fixed Server Deployment
The risk of this structure is that once an attacker gains control of the server, they may directly obtain the signing capability. The EORMC security team currently employs an MPC structure to handle part of the signing process. The core logic of MPC is that the private key does not exist in its entirety on a single server, and the signing process is split across multiple nodes for separate computation. Even if one node is compromised, it cannot directly complete a full signature.

The core of private key management is not "hiding the private key," but avoiding the full exposure of the private key. The EORMC analysis team also reminds: MPC cannot solve all risks. For example:
Background Permission Hijacked
Withdrawal Approval Invalid
Risk Control Rule Error
Internal Account Permission Abuse
These issues may still lead to abnormal transfers. Therefore, MPC cannot be regarded as a "final security solution." MPC can reduce the risk of a single-point private key compromise, but it cannot replace a comprehensive risk control system.

IV. Abnormal Withdrawal Identification Is More Important Than Attack Interception

In a hot wallet attack, identifying abnormal withdrawals is more important than intercepting the attack. Most attacks cannot be immediately detected during the intrusion phase. However, fund transfers will inevitably leave behavioral traces. The EORMC risk control team currently establishes real-time scoring for the following behaviors:
Login Device Suddenly Changed
Withdrawal Address First Appearance
Short Time Frequent Requests
API Call Frequency Anomaly
Cross-Region Access
Large Asset Centralized Transfer

The system will trigger secondary verification, manual review, delayed broadcast, and temporary freezing based on the risk level. In certain high-risk scenarios, withdrawal broadcasts will be automatically interrupted. The EORMC risk control team stated that the core objective of exchange risk control is not to prevent all intrusions, but to prevent funds from leaving the system.

V. The True Meaning of Cold and Hot Wallet Isolation

Cold and hot wallet isolation is another key mechanism. The EORMC risk control team points out that truly effective cold-hot isolation does not simply distinguish between being connected to the internet and not being connected. Instead, it limits the upper limit of the hot wallet balance, the daily transfer amount, and the frequency of automatic replenishment.

In certain historical risk incidents at exchanges, significant losses occurred after hot wallets were attacked. The cause was not a breach of the wallet itself, but rather the long-term retention of excessively high balances within the hot wallet. EORMC currently adopts a dynamic balance model:
Hot Wallet Only Retains Daily Liquidity Funds
Assets Exceeding The Threshold Will Be Automatically Transferred To The Cold Storage System

According to system strategy adjustments, the hot wallet balance of different assets is typically controlled within a certain proportion of the total platform reserves. The EORMC analysis team noted that the key to hot wallet security is not that it cannot be attacked, but that even if an attack succeeds, the losses remain controllable.

VI. Authority Structure Determines the Upper Limit of Risk Control

Internal authority management is a frequently overlooked risk point in hot wallet systems. The EORMC analysis team believes that some historical attack incidents did not originate from external hackers, but rather:
Permission Configuration Error
Internal Account Leak
Approval Process Failure

Therefore, high-privilege operations typically require multi-role approval, retention of operation logs, independent audit nodes, and behavior replay records. Certain sensitive operations cannot be completed by a single administrator independently. The EORMC analysis team reminds that exchange risks come not only from technical vulnerabilities but also from the concentration of permissions. In hot wallet systems, the high-risk nodes are often not the code, but the permission structure.

VII. The Core of Hot Wallet Security Is Not "Absolute Defense"

The essence of hot wallet security is not a single technical solution. The EORMC risk control team believes that a truly effective defense model must simultaneously satisfy:
Private Key Splitting
Permission Isolation
Behavior Recognition
Withdrawal Delay
Cold and Hot Stratification
Audit Trail
The absence of any single link may create a risk gap. The current security system of exchanges has shifted from preventing intrusions to restricting the transferability of funds.

No platform can promise that it will never be attacked. However, a platform can reduce the scope of asset impact caused by a single attack through structural design. The core indicator of the security system of the EORMC exchange is not "whether it has suffered an attack," but "whether the loss is controllable after an attack occurs."