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Comment by joyfylbanana | Hacker News Reader

I don't really get what you are talking about. Any sane custodial system has "hot" funds from where customers withdrawals are processed from. When the "hot wallet" drops too low, it is refilled from "cold storage" which is high security offline storage, and usually way slower to get funds out of because humans are involved in the process.

If business is going as usual, customers don't see anything, because hot wallet funds are kept at acceptable levels. Not too high, because you don't want to have too much funds online in a case a hack happens. Not too low, because you want customer withdrawals to function. However, if some kind of panic happens and people start withdrawing a lot at once, then you will always have delays, assuming that you have a sane system.

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How long should it take to get funds from a cold wallet to a hot wallet?

Hint: if it's more than 1 block (~10mins) you're either incompetent or fraudulent

Moving from cold to hot wallets in an environment with regulatory requirements, redundancy, multiple partial keyholders, and offsite storage could easily take days to weeks and require scheduling access to the physical vault holding the cold storage. You're conflating hot and warm storage - warm can replenish hot but cold requires physical access to somewhere ideally unrelated to where day-to-day operations run.

Xapo, one of the biggest cold wallet firms in the world, has a security feature that you can request where their people fly on a private jet to meet you personally and confirm face to face that you indeed are the one making the request to move funds from their cold wallet.

The problem is that even your "sane" system will consistently fail to be appropriately liquid, even when compared to traditional finance. Exchanges are a liability being thrown into the mix, and since the cold/hot funds aren't regulated they could frankly be spent on anything. Their cold wallet could be tied up in the speculation market or being leveraged against lenders. Every one of these exchanges has every incentive to operate against the user's wishes, at the end of the day.

Exchanges simply don't work. The comparison between them and banks ignores the surrounding regulation and guarantees that banks are obligated to issue you. Are my FTX holdings FDIC insured?

> Every one of these exchanges has every incentive to operate against the user's wishes, at the end of the day.

It's not that simple. Operate enough against the user's and you'll find yourself indicted. Not being regulated doesn't mean it's a free for all and you can just take the money.

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