Cryptocurrency exchange: safe or not safe
As cryptocurrencies develop and trading volumes grow, the number of risks involved with investing in altcoins increases. Shocking news about cases of hacking and exchange collapses often grab the headlines. As a result, cryptocurrency rates come under pressure, at least in the short term.
The short history of cryptocurrency trading has seen several cases, which explain why investors should scrupulously check the safety of the exchange they are planning to use for trading. The collapse of Mt.Gox seems to be the most high-profile one. After the Tokyo-based exchange was hacked in 2011, the bitcoin price was reduced to one cent thanks to fraudulent activities. The criminal allegedly used data from the hacked computer that belonged to the auditor of the exchange to illegally transfer a large amount of bitcoins to its own account. The trading on the exchange resumed, but Mt.Gox was closed in 2014 after a new portion of news on loss due to hacking.
Slovenian mining platform NiceHash identified a vulnerability in its payment system and announced the theft of bitcoins worth $64 mln. But the exchange resumed operations later on.
Italian exchange BitGrail announced hacking and loss of $195 mln of cryptocurrencies belonging to its clients this month. The hackers mostly stole Nano cryptocurrency, the clients lost 17 mln tokens. Results of the investigation coupled with further activities of the exchange may show that the exchange mismanaged clients’ funds and is trying to hide it by referring to the attack.
Similarly, trading was stopped on Hong Kong’s Binance, which said it was updating its system, but many investors were afraid it was a hacker attack or something worse. A long hiatus caused a client outflow.
Dublin’s Coinprism announced on Monday that it will stop all operations on March 31, 2018, the reason has not been disclosed.
Thus, what an investor who is interested in trading or saving cryptocurrencies should do if they want to identify potential problems of the stock exchange and avoid any risks related to a hacker attack? Are there any ways to learn about potential problems of the stock exchange?
Dror Medalion, Co-Founder and CEO of BitJob, an online platform for those who look for online short-time jobs, said that many exchanges run into coding errors, face hacker attacks or fail to fulfill their obligations to clients.
“A DDoS attack is one of the most popular hacker attacks, it causes a temporary malfunction of the site due to the excessive amount of requests. Users have to be on alert when they trade on cryptocurrency exchanges. Let’s not forget they are not regulated. Most of the platforms provide traders with safe and convenient functions, but sometimes they cannot know what is happening behind the scenes, what technical, political or business problems cannot be seen by common users.”
Xiahong Lin, the founder of decentralised prediction market platform Bodhi oriented towards the Chinese market, said that investors should consider safety of their tokens first while selecting a stock exchange. The best way to make sure your tokens are safe is not to keep them on exchanges at all.
“Controlling your own digital assets by storing them on the local or hardware wallet is much safer than keeping it on the stock exchange. If a hacker attack occurs, it will not hit you, if you keep your assets in your personal system. If you prefer to keep your assets on the stock exchange, it would be reasonable to cooperate with stock exchanges that offer protection in case of loss, for instance, accounts insured by the US Federal Deposit Insurance Corporation. This will make a stock exchange more attractive for traders. Platforms that do not offer any protective measures are risky.”
Sometimes regulations may cause an unexpected closure of a trading platform in certain countries. For this reason, the best way to protect your assets is to constantly track news, regulation policies in your country and the country of your stock exchange.
Where to keep your coins
One of the key investor decisions is where to keep tokens: in the wallet of the exchange or somewhere else. In the second case, you are responsible for your own assets and the only holder of digital keys and signatures.
Experts say that users have to make sure that they can use two-factor authentication and keep their domain name in tabs to avoid fishing.
Cryptocurrencies are developing, and they will become more secure in time. Meanwhile, just like in case with any other investment assets, the best way to protect yourself is to be attentive and to have a profound understanding of instruments and investment environment.