How to Secure Cold Wallets and Hot Wallets From Theft?

Cold wallets and hot wallets, as essential tools for storing large sums of money, are under constant scrutiny for their security. The technical proficiency and persistent threat capabilities of attackers are continuously evolving. Faced with these ever-emerging security challenges, how to construct an impregnable defense system to ensure the safety of assets within wallets has become a core issue that every user and institution must seriously confront and resolve.

In response to the increasingly complex security threats, cutting-edge cryptographic techniques combined with hardware security solutions have emerged. The dual protection technology of MPC (Secure Multi-Party Computation) and TEE (Trusted Execution Environment), coupled with a refined permission control system and real-time anomaly detection mechanism, precisely identifies suspicious operations and promptly intervenes in risks. While enjoying the convenience brought by blockchain technology, it ensures the absolute safety of funds.

Dual Protection of MPC and TEE: Laying a Solid Foundation for Wallet Security

• Multi-layered Private Key Sharding Protection: The private key shards of cold and hot wallets are strictly isolated and stored. Some shards are stored in the physically isolated cold wallet environment, while others are stored in the TEE-protected hot wallet environment, forming multiple layers of protection. The combination of physical and digital isolation creates a robust security barrier. Even if hackers breach one layer of protection, they cannot obtain the complete private key information, significantly increasing the difficulty of an attack. According to cryptographic analysis, when using threshold schemes such as 2/3 or 3/5, attackers would need to simultaneously break through multiple independent security systems to obtain enough private key shards, which is computationally almost an impossible task.
• TEE Technology: As a secure computing environment based on hardware security implemented by a CPU, TEE can perform privacy-preserving computations while ensuring computational efficiency. It provides a secure "vault" for private key shards, ensuring that they are processed in an isolated and trusted environment, thus being immune to external software attacks. TEE technologies (such as Intel SGX, ARM TrustZone) create a completely separate trusted execution area from the main operating system through processor privilege-level isolation and memory encryption technology. This technology has been widely validated in financial institutions, medical systems, and military applications, and its security has been recognized by authoritative institutions such as NIST (National Institute of Standards and Technology). Practical applications have proven that TEE can effectively defend against advanced attack methods such as memory injection, privilege escalation, and side-channel attacks. Even if the operating system is completely compromised, the data and computational processes within the TEE environment remain secure and intact.
• Hardware Security Module (HSM) Integration: To further enhance security, some private key shards are stored in HSMs that meet FIPS 140-2 Level 3 and above standards. HSMs provide physical tamper-proof protection, ensuring that key shards are difficult to steal or tamper with at the physical level. These professional-grade HSM devices are equipped with multiple physical protection measures such as self-destruct mechanisms, anti-drilling layers, temperature and voltage monitoring. Once a physical intrusion attempt is detected, the device immediately erases all sensitive data. FIPS 140-2 Level 3 is a cryptographic module validation standard established by NIST and widely adopted by global financial institutions and government departments.

Refined Permission Control: Ensuring Secure Fund Flow

• Policy Engine and Transaction Strategies: Institutional users can use the policy engine to formulate flexible transaction strategies, controlling the transaction process from multiple dimensions (such as initiators, source accounts, target accounts, currencies, amounts, quantities, etc.), to achieve transparent and decentralized fund management. This refined permission control ensures that every transaction is strictly monitored, effectively preventing unauthorized fund transfers. The advanced policy engine supports complex conditional logic and time window restrictions, such as "transactions initiated by the finance department personnel, reviewed by the finance supervisor for the correctness of the transaction address and amount, and reviewed by the risk control supervisor for wallet address risks within 24 hours and below the equivalent of $100,000" and other fine-grained rules.

• Multi-party Approval and Threshold Signature Scheme: Large fund transactions must be approved by multiple personnel before execution, using an M/N threshold signature scheme to prevent single-person malfeasance. This mechanism ensures that the decision-making process of fund flow is more democratic and transparent, significantly reducing the risk of malicious operations by internal personnel. In addition, this mechanism also implements the principle of "segregation of duties." The threshold signature scheme also supports asynchronous and geographically distributed approvals, solving the geographical limitations and efficiency issues of traditional multi-signature schemes, allowing globally distributed teams to manage digital assets safely and efficiently while meeting the needs of 24/7 business operations.

• Principle of Least Privilege: Safeheron designs a fine-grained role-based access control system, ensuring that each role can only access the minimum permissions required. This principle of least privilege minimizes the risk of security breaches due to permission abuse. Specifically, the system supports multi-dimensional permission combinations, such as "read-only asset information," "view transaction history," "initiate transfers," etc. Moreover, this permission model supports dynamic adjustments, which can be made in real-time according to changes in employee roles, temporary task requirements, etc., to achieve a zero-trust security model of "just-in-time access, just-in-time revocation," setting a new standard for institutional digital asset security management.

Anomaly Detection and Behavioral Analysis: Real-time Monitoring

Deploying an anomaly detection system that can identify unconventional wallet operation patterns and trigger alerts in real-time. All operations are recorded in tamper-proof audit logs based on blockchain technology, using timestamps and cryptographic signatures to ensure log integrity. A real-time monitoring mechanism is in place, with multi-channel alerts triggered immediately in case of anomalies. These audit logs meet SOC 2 Type II compliance requirements. This real-time monitoring and behavioral analysis mechanism ensures that any suspicious activity is detected and handled promptly, with response speeds as low as milliseconds, supporting risk mitigation measures such as IP whitelisting and mandatory multi-factor authentication.

Conclusion

In the increasingly complex and high-risk environment of digital asset trading, the security protection of cold and hot wallets has become a core issue in ensuring the safety of digital assets. By integrating cutting-edge cryptography with hardware security technology, a dual security protection barrier centered on MPC (Secure Multi-Party Computation) and TEE (Trusted Execution Environment) has been constructed, achieving a perfect combination of private key sharding management and hardware isolation. Coupled with a refined role-based permission control system, multi-party approval mechanisms, and threshold signature schemes, it effectively eliminates single points of failure and internal threat risks.

At the same time, relying on anomaly detection systems and tamper-proof real-time audit mechanisms, a comprehensive, multi-layered security defense system has been built for users. This security architecture not only meets the stringent security requirements of high-net-worth individuals and institutional investors for digital assets but also provides a solid guarantee for the safe storage, efficient management, and flexible scheduling of digital assets through internationally recognized compliant designs, truly achieving a perfect balance between security and usability.