- March 29, 2023
- |Bitcoin, Investment
Crypto exchanges are convenient, but they are certainly not safe. To best protect your assets it is best to withdraw your bitcoin from exchanges and store your crypto in a more secure place.
While many platforms tout security measures, exchanges are a natural target for hackers and thieves due to the immense amounts of digital assets. In 2014, the infamous Tokyo-based Mt. Gox crypto exchange was hacked, and thieves made off with about 740,000 Bitcoin. Only about 200,000 were recovered. Many users lost all their crypto. Years later, in 2023, news emerged that another massive crypto platform, the failed FTX exchange, had about $415 million in crypto stolen by hackers after the firm filed for bankruptcy.
These high-profile thefts would seemingly make it a no-brainer for crypto users to remove assets of exchanges as soon as possible. Sadly many still don’t do so.
Why Exchanges Are Not A Safe Home For Your Bitcoin
What’s the main issue with leaving crypto like Bitcoin on exchanges?
Since centralized platforms hold the private keys to accounts, exchanges are actually in complete ownership over your funds. This idea can be summed up as “Not your keys, not your coins.” There’s a massive risk with entrusting private keys to a crypto exchange. Since you don’t actually own the funds, you cannot spend or send the coins freely or have guaranteed, immediate access to digital assets. Additionally, leaving Bitcoin on an exchange means you’re also trusting the platform has adequate security measures in place to protect assets, is not lending out your crypto to other users, and will not go bankrupt and lose crypto via forced liquidation.
Many exchanges are quick to try and convince customers about their stability and security. But, unfortunately, the truth can sometimes be much more mudded.
In January 2019, the founder/CEO of Canadian crypto exchange QuadrigaCX reportedly died suddenly in India. News quickly emerged that CEO Gerald Cotten was the only one with the correct information to access about $190 million in crypto and fiat money stored on the exchange. Additional information that trickled out revealed that the exchange’s finances were in ruin and that Cotten’s purported death and the subsequent announcement of his demise had a few mysterious aspects. At the time of the collapse, QuadrigaX was estimated to have owed customers nearly $200 million in crypto.
Is there a better option than exchanges for Bitcoin storage? Ideally, all crypto users should withdraw their crypto to a separate cold storage wallet for optimal security.
Cold storage hardware wallets often look like USB sticks and are impossible to hack. They do not connect to the Internet except when in use. Even then, transaction signing occurs within the device and broadcasts to the network. As a result, your private keys are always safely secure on the physical device. A criminal would need to get their hands on the physical hardware wallet as well as the associated passwords and PIN to access funds.
Secure hot wallets are another strong choice for those interested in easier access to their Bitcoin. While these are less secure than cold wallets since they are always Internet-connected, good options offer an array of authentication and security-focused tools that make them more optimal than exchanges.
Are you looking for a secure crypto wallet with unique attributes like access to physical ATMs and the ability to open a crypto-friendly traditional bank account with a debit card?
ByteFederal’s ByteWallet features seamless Bitcoin storage, access to the Lightning Network, cutting-edge security tools, and complete control over your private keys. Learn how to ‘Go Bank, Yourself’ with ByteWallet.