How we built one of the largest database of unique exchange wallets for CoinFi users

Updated 2 years ago by Wayne Lam

To understand how we identify exchange wallets, it is important to first have a basic understanding of how most exchanges handle user assets. For most exchanges, it is typical for there to be two different types of wallets; we call these deposit wallets and exchange wallets. Deposit wallets as its name suggests handle all the deposits, while exchange wallets handle all the withdrawals.

When a user makes a deposit to the exchange, the address they send to is the deposit wallet. The deposit wallet is unique to the user and serve as a way of identifying which user account the deposits came from.

Once it goes into the deposit wallet, it then sends the assets to an exchange wallet; the timing of the transfer differs depending on which exchange we’re referring to. The exchange wallet is where the exchange usually hold most of its users assets, and any withdrawals are done by transfer via this exchange wallet.

For deposit wallets, any material amounts are generally transferred to the withdrawal wallet in a timely manner. As such, exchange wallets will be our primary focus throughout the article as we can use these to track both deposits coming in from deposit wallets as well as withdrawals going back out to users.

How do we identify exchange wallets?

The characteristics of an exchange wallet is quite distinct. Through a combination of machine learning and a team of blockchain experts, we can find exchange wallets with relative ease. For example, some characteristics of exchange wallets is that they generally have:

  1. A large number of transactions
  2. Transactions going in or out come from many different addresses
  3. Transactions going in or out come in wide varying amounts (ie. 0.2 ETH going out, 3 ETH going out, 439.23 ETH going out)
  4. Large amounts of ETH
  5. The wallets that deposit into this address follow a pattern that is very systematic and distinctive of deposit wallets

The characteristics above are only some of the variables we consider and serve as a general guideline for us when we are identifying exchange wallets. Of course, the actual characteristics of any individual exchange wallet may vary depending on which exchange the exchange wallet belongs to.

Some exchanges, although rare, may not exhibit the same orthodox wallet structure that we’ve explained above. Coinbase for example, has a much different structure compared to other exchanges. For the most part however, the deposit wallet-exit wallet structure is how most exchanges operate.

What does the Binance exchange wallet look like?

As a practical example, let’s take a look at Binance’s exit wallets. On Etherscan, Binance has 5 labelled exchange wallets (note: labelled wallets on Etherscan are generally done by the projects themselves via contacting Etherscan support).

The Binance_1 wallet’s main job is to be on the receiving end for the deposits from all the user deposit wallets, which it then disburses in lump sum amounts to all its other exchange wallets, labelled Binance_2 to Binance_5. Binance_2 to Binance_5 handles all the withdrawals.

Looking at the Binance wallets, we can also see that they have the same characteristics as the ones we had mentioned above unique to exchange wallets:

As mentioned earlier, Etherscan has a list of labelled exchange wallets, voluntarily added by the exchanges themselves. The number of wallets labelled here are few in number relative to the total number of exchange wallets currently available and are generally the main addresses that most blockchain analytic projects use.

We have one of the largest database of exchange addresses

In order for our signal to work well and differentiate from existing products out there, our machine learning algorithms and team of blockchain experts hunt for exchange wallets using the above characteristics as a general guideline.

Right now, we have one of the largest database of exchange addresses with hundreds of exchange wallets and millions of deposit wallets tagged. This proprietary database, along with our ingestion of the Ethereum blockchain in real time, serves as a core component of our Trading Signals product.

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