How Does a CEX Typically Manage the Private Keys for Client Assets?
A CEX uses a combination of hot and cold storage solutions. A small portion of assets is kept in "hot wallets" (online, connected to the internet) for immediate liquidity.
The vast majority is secured in "cold storage" (offline, multi-signature wallets, often geographically dispersed) to minimize the risk of hacking. The exchange's security team manages the complex key generation and signing processes.
Glossar
Client
Exposure ⎊ A client, within cryptocurrency and derivatives markets, represents the counterparty bearing the economic consequence of a traded instrument, fundamentally defining risk allocation.
Private Keys
Ownership ⎊ Private Keys are the secret cryptographic credentials that mathematically prove ownership and grant exclusive control over associated cryptocurrency addresses and the assets they secure.