The spectrum
An institution does not choose one. It runs a tiered setup: a small hot float sized to expected withdrawals, topped up on a schedule from cold storage, so a hot-wallet compromise is bounded by the float rather than the balance sheet.
Related distinctions worth separating
These get conflated with hot and cold, and are independent of it. Custodial vs self-custodial. Custodial means a third party holds the key on your behalf — an exchange, a broker, a qualified custodian. Self-custodial means you hold it. Both can be hot or cold. Single-signature vs multisignature. A multisig address requires m of n keys to authorize a transaction, so no single key compromise is sufficient. Onchain this is usually a smart contract, so its transactions look different from a plain address: the contract executes, and the individual approvals are internal calls or prior transactions. MPC. Multi-party computation splits one key into shares held by different parties, which sign jointly without ever reconstructing the key. Unlike multisig this is invisible onchain — an MPC address looks exactly like an ordinary single-signature address.What custody looks like onchain
You cannot read a private key’s location from the chain. What you can read is behaviour, and behaviour is a reliable signal.Address labelling is not something you can derive from behaviour alone with confidence — clustering heuristics produce false positives, and exchanges rotate addresses. Use a maintained labelled dataset for anything you report on. Allium’s Identity vertical provides entity labels including exchange and institutional attribution, and Wallet Classification segments end-user wallets by behaviour.
Where to look in Allium
Next steps
- Token standards — what “holding a token” actually means per chain
- Transaction finality — how long to wait before crediting a deposit