Secondary wallets are a critical security practice for API operations. This guide covers the security principles and best practices.
Security Principles
Principle of Least Privilege
Secondary wallets implement the principle of least privilege by:- Limited scope: Only used for specific API operations
- Minimal permissions: No access to personal or business funds
- Controlled access: Restricted to authorized API endpoints
- Audit trail: All activities are logged and monitored
Defense in Depth
Using secondary wallets creates multiple security layers:Primary Wallet
- Remains secure and isolated
- No API access or exposure
- Protected from compromise
- Maintains full control
Secondary Wallet
- Limited scope and access
- Dedicated for API operations
- Easy to replace if compromised
- Clear separation of concerns
Security Benefits
Risk Mitigation
- Isolation: API operations isolated from main funds
- Exposure reduction: Limited attack surface
- Quick recovery: Easy to replace compromised wallet
- Damage control: Minimal impact from security incidents
Compliance and Audit
- Clear separation: Business vs. personal transactions
- Audit trails: All API activities are traceable
- Regulatory compliance: Meets separation requirements
- Documentation: Clear purpose and usage records
Security Best Practices
Wallet Management
Access Control
- Limit access to authorized personnel
- Implement role-based permissions
- Regular access reviews
- Secure key storage
Monitoring
- Real-time activity monitoring
- Automated alerts for unusual activity
- Regular security audits
- Transaction pattern analysis
Backup Strategy
- Secure backup procedures
- Multiple secure locations
- Regular backup testing
- Recovery documentation
Incident Response
- Immediate compromise response
- Wallet replacement procedures
- Communication protocols
- Post-incident analysis
Security Checklist
Wallet Creation
Generate new wallet with secure entropy
Store private key in secure location
Document wallet purpose and scope
Access Control
Implement strict access controls
Use secure key management systems
Regular access reviews and audits
Monitoring Setup
Configure real-time monitoring
Set up automated alerts
Establish incident response procedures
Security Considerations
Threat Models
Compromised API Credentials:- Secondary wallet limits exposure
- Easy to replace without affecting main funds
- Clear audit trail for investigation
- Limited scope prevents widespread damage
- Monitoring detects unusual patterns
- Quick response and recovery procedures
- Access controls limit unauthorized use
- Audit trails provide accountability
- Separation reduces insider threat impact
Compliance Requirements
- Regulatory separation: Meets financial regulation requirements
- Audit trails: Provides clear transaction history
- Risk management: Demonstrates security best practices
- Documentation: Supports compliance reporting
Incident Response
Compromise Detection
- Unusual activity: Monitor for unexpected transactions
- Failed authentication: Track authentication failures
- Pattern changes: Detect deviations from normal usage
- Security alerts: Automated monitoring and notifications
Response Procedures
Immediate Response
Disable compromised wallet access
Notify security team immediately
Document incident details
Investigation
Analyze compromise scope and impact
Review audit logs and monitoring data
Identify root cause and vulnerabilities
- Document purpose: Clearly label this wallet for API operations only
Security Measures
- Separate storage: Store private key separately from primary wallet
- Backup securely: Create secure backups of the private key
- Access control: Limit access to authorized personnel only
- Regular audits: Review wallet activity and access logs
Operational Guidelines
- Dedicated use: Use exclusively for API operations
- No personal transactions: Keep separate from personal crypto activities
- Clear labeling: Mark all transactions as API-related
- Documentation: Maintain clear records of wallet purpose and usage