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In the XRP Ledger, financial institutions typically use multiple XRP Ledger addresses to minimize the risk associated with a compromised secret key. The industry standard is to separate roles as follows:

  • One issuing address, also known as a "cold wallet." This address is the hub of the financial institution's accounting relationships in the ledger, but sends as few transactions as possible.
  • One or more operational addresses, also known as "hot wallets." Automated, internet-connected systems use the secret keys to these addresses to conduct day-to-day business like transfers to customers and partners.
  • Optional standby addresses, also known as "warm wallets." Trusted human operators use these addresses to transfer money to the operational addresses.