Why keeping your Cryptocurrency on an exchange is a bad idea
- December 13, 2022
Cryptocurrency exchanges are hacks just waiting to happen. Billions of dollars’ worth of cryptocurrency has been stolen from exchanges in the past few years. The Mt. Gox hack in 2014 saw the loss of $460 million, while the Coincheck hack in 2018 resulted in the theft of $534 million. Binance, one of the most successful cryptocurrency exchanges, was hacked for $570 million in October 2022. A cross-chain bridge known as BSC Token Hub was exploited by hackers which resulted in the creation of extra Binance Coins (BNB) and the withdrawal of 2 million BNB tokens.
While it may be convenient to store your cryptocurrency on an exchange, it’s not worth the risk. Exchanges are a prime target for hackers because they hold large amounts of cryptocurrency in one place. If you’re keeping your cryptocurrency on an exchange, you’re essentially painting a target on your back and asking to be hacked.
Exchanges are Vulnerable to Hacks
The main reason exchanges are such attractive targets for hackers is because they hold large amounts of cryptocurrency in one place. This is a hacker’s dream because it means that if they can gain access to an exchange’s wallets, they can make off with a huge amount of money in a single heist.
Another reason exchanges are vulnerable to hacks is because they often lack basic security measures. For example, many exchanges don’t require 2-factor authentication (2FA) for account login. This means that if a hacker knows your username and password, they can gain access to your account and steal your funds.
Some exchanges do have 2FA enabled by default, but even then, there are ways around it. In the case of the 2018 Bithumb hack, hackers were able to exploit a flaw in the way Bithumb stored user information to bypass 2FA and gain access to customer accounts. Once they had access, they simply transferred all of the funds out of the accounts and into their own wallets.
What can you do to protect your Cryptocurrency?
The best way to protect your cryptocurrency is to store it offline in hardware wallet or cold wallet—a wallet that’s not connected to the internet. Hardware wallets can take many different forms, but the most popular type is a hardware wallet like the Trezor or Ledger Nano S. These devices allow you to store your cryptocurrency offline so that even if your computer is hacked, your coins will be safe and sound.
Another option is to store your cryptocurrency on a paper wallet. A paper wallet is simply a piece of paper with your public and private keys printed on it. As long as you keep this piece of paper safe and secure, your coins will be safe from thieves and hackers alike.
If you’re serious about protecting your cryptocurrency, then you need to take measures to ensure that it is stored safely and securely. Keeping your currency on an exchange is a huge risk—one that could costly if you’re not careful. The best way to protect your coins is by storing them offline in a cold wallet or paper wallet. By taking these precautions, you can rest assured knowing that your currency is well-protected against hackers and thieves alike.
Global Legal Law Firm is an innovative legal firm that has helped clients navigate the ever-changing cryptocurrency landscape. Our attorneys are rooted in electronic payments litigation and have a proven track record of providing clarity around dynamic regulations to ensure compliance.
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