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How safe is your money with crypto exchanges

Everything you hear of in the world of crypto has some link with the king of cryptocurrency, namely Bitcoin. And so it goes with stories of safely storing your cryptocurrency. A quick look at Bitcoin’s illustrious history reveals why it is quite dangerous to leave crypto funds lying about in an exchange. From 2011, it has been reported that more than $1.65 billion worth of assets of crypto have been the brunt of theft, stolen easily, and numbers keep accelerating. Storing digital assets like cryptocurrency in a crypto exchange brings risks, especially if you are thinking along the lines of long-term storage. 

Risks of a Crypto Exchange 

When values are adjusted against the effects of inflation, the loss due to the theft of cryptocurrency amounts to a stunning $12.6 billion. With any digital aspect of things being dealt with, there is always the risk of hacking into exchanges and robbery as a result. Besides this, however, the crypto exchange itself may possess inherent faults and these are:

  • Mismanagement 
  • Loss
  • Participation in Fractional Reserve Banking

Stories of loss of several millions of dollars are frequently heard. For instance, the Quadriga CX exchange whose owner unfortunately saw a sad demise along with all the private keys of the exchange, is an instance of loss. This amounted to a loss of access to $190 million of funds of users. Exchanges attract hacker targets as they store cryptocurrency worth billions of dollars and don’t have sufficient support for crypto security. Hackers find it more profitable to access an exchange with a bulk of crypto than the vault of a bank. Cryptocurrency is akin to a pot of gold at the rainbow’s end, but instead of a leprechaun,  hackers have to outsmart an exchange’s security measures. Consequently, hackers find new and innovative ways to infringe upon exchanges, leaving them prone to highly sophisticated attacks from cyber villains.

Convincing Facts

When you open a Demat account online, you know that your securities will be kept safely, but this is not the case with cryptocurrency held as an asset. When you consider the following facts that have come to light about cryptocurrency exchanges and their safety in recent years, you may want to rethink your crypto security options: 

  • Crypto exchanges face a loss of $2.7 million on an average, per day. Analysts say that this figure will only rise in the future.
  • The attacks of hacking are gradually becoming more and more elaborate. Besides this, hacking proves to be rewarding for the hacker and so, time and effort spent on planning and organising meticulous hacking strategies is considered a well-invested activity. 
  • A crypto exchange is not equipped with measures of cybersecurity. The main priority of the exchange is the operation of a marketplace, and hence, high-level security is not a guarantee. 

Some Safety Measures

Proficient exchanges have a few features where your crypto may be quite safe. For instance, they won’t allow users to create passwords that are weak, ensuring that no one can break your code. What’s more, secure and safe exchanges use a valid HTTPS certification. When you enter such an exchange online, your browser has a way of automatically confirming crypto security by displaying a lock symbol in the address bar. Besides all this, a cryptocurrency exchange with two-factor verification that uses multiple methods to authenticate genuine users, like software, hardware and SMS, assures you of a good level of safety. 

Disclaimer: This article is purely for educational/informational purposes, and as such, not to be read as advice or recommendations to invest in cryptocurrencies. It is wise to have your finances secured via more regulated instruments like stocks, debt funds, bonds, mutual funds, fixed deposits, etc. It is also important to have necessary insurance and emergency funds for safety. Click on this link to learn more. You can also click this link to open a demat account.

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