A Levain Self-Custody Wallet can be used for many different use cases. In this article, we explore the two common structures that you can consider when setting up your wallets within the Levain platform.
Segregated wallets
In this model, you create individual wallets for each client or user account on your own platform. Each client's assets are held separately in their respective wallets, reducing the risk of commingling assets across different clients.
This approach enhances security and transparency, as each client can independently verify their wallet balances and transactions. It also allows for easier auditing and reporting, as transactions can be traced to specific clients.
Considerations
Enhanced security and risk management, as each client's funds are isolated.
Greater transparency and accountability for clients' assets.
Simplified auditing and regulatory compliance.
Higher infrastructure and management overhead, as each client requires a separate wallet.
Omnibus wallets
In this model, you maintain one or more omnibus wallets. These omnibus wallets hold the digital assets of multiple users collectively. You will be able to generate as many wallet addresses as you want, and issue them to your own clients.
When your clients deposit assets into their unique addresses, you should maintain your own internal ledger to ensure the digital assets are credited internally within your own ledger.
On Levain, funds will be automatically forwarded to a main omnibus wallet, where you can choose to also process withdrawals from the same wallet, or to configure this omnibus wallet as a cold wallet with a separate hot withdrawal wallet.
Considerations
Lower infrastructure overhead, as the exchange can manage multiple user accounts within a single omnibus wallet.
Faster processing of user withdrawals, as transactions are handled from this single omnibus wallet.
Simplified fee calculation and liquidity management.
Higher risk, as multiple users' funds are held in a single wallet.
Other considerations
It's important for exchanges to carefully evaluate their business requirements, regulatory obligations, and security considerations when choosing a wallet segregation model. Additionally, implementing appropriate security measures, such as cold storage for large reserves and regular security audits, is essential to safeguarding user assets regardless of the chosen model. Transparency and communication with users about wallet practices and security measures can also enhance user trust in the platform.
Not sure what wallet structure fits your use cases? Speak to us at [email protected] and we'll be more than happy to have a chat.