How to Choose the Best Crypto Exchange?
Since 2011, cryptocurrency exchanges have suffered from 56 successful cyber attacks. The total amount of money lost is as high as $1.63 billion, according to London’s Autonomous Research.
This is an extraordinary number, especially when you consider that some of the biggest break-ins happened long before 2017’s crypto boom. Otherwise, the figure would be far higher; the Mt. Gox hack alone would be worth over $5 billion at 2017’s peak prices.
This begs the question: why is the crypto space so prone to criminal attacks? And how can consumers know which exchanges are trustworthy and resilient to criminal attacks?
In this article, we’ll answer these 2 major questions by exploring the key factors of crypto exchange safety.
Why many exchanges are risky?
Cryptocurrencies are digital assets. Depending on the exact nature of a specific cryptocurrency, they’re called “coins”, “tokens”, “digital assets”, etc.
Now here’s the thing. When you buy something at a stock exchange, the exchange doesn’t hold the asset for you. Crypto exchanges, however, do hold your assets for you. As a result, they have large virtual coffers stuffed to the brim with their customers’ tokens.
This means that robbing a crypto exchange is far more lucrative than stealing from any single crypto wallet. Moreover, stealing from an exchange can be far easier, all other things being equal. Here’s why.
Satoshi Nakamoto – the creator(s) of Bitcoin – has a wallet with 1,000,000 BTC. During 2017’s crypto boom, this wallet was worth well over $20 billion dollars; 20 times more than Facebook paid for Instagram in 2012. This makes the wallet an excellent target for thieves.
The problem is that finding and breaking into Satoshi Nakamoto’s wallet would require trying more wallet address and passcode combinations than there are atoms in the known universe. A supercomputer would need millions of years to execute the attack successfully.
Breaking into an exchange, on the other hand, simply means finding a single vulnerability, exploit, or weakness that makes an attack possible. There’s also no need to locate the exchange, since its website and digital assets are public.
What does all of this mean? First, that breaking into a crypto exchange is far easier than doing the same with a crypto wallet. Second, that outside a small number of wallets, crypto exchanges have a lot more money.
This, in a nutshell, is why crypto exchanges are attractive for criminals but risky for their users.
How can you tell an exchange is safe?
Given all of the above, it is essential to understand how find a safe place to buy and store your cryptocurrencies from now on. Below are 3 key attributes to consider.
- User base. The more users and transactions an exchange has, the more trust it establishes among users. It can also guarantees liquidity and volume.
- Cold storage. Exchanges that use cold wallets that are disconnected from the Internet are a lot more secure. Online environment is vulnerable to hacking, as discussed above the Mt.Gox incident.
- Multi-sig transactions and wallets. This feature refers to transactions requiring multiple electronic signatures, adding an additional security layer. Also, multi-sig allows more than 2 people to approve a transactions. Such that if the Canadian crypto exchange QuadrigaCX situation was to happen again, users would still be able to get their assets with others’ signature.
Finding an exchange that has high user numbers, cold storage, and multisig functionality can be tough. Not sure where to find a platform that ticks all the boxes?
With over 100,000 monthly transactions, CoinCola is one of the biggest, most trusted crypto marketplaces. Both cold storage and multisig transactions are implemented to ensure your digital assets are safe with CoinCola.
Founded in 2016, CoinCola is a Hong Kong based company offering both over-the-counter cryptocurrency trading and crypto-to-crypto pair trading exchange. CoinCola now serves millions of users from over 150 countries with our fast, secure, and reliable trading services. We support BTC, ETH, BCH, LTC, USDT, DASH, and XRP. Visit www.coincola.com for more information.