What Can An Exchange Do to Make Your Cryptocurrencies Extra Safe?
2022-04-29 16:34:37
Which Crypto Exchange Is The Safest Based On Additional Measures?
To start the journey of cryptocurrency, many will choose a crypto exchange as the first step. There are hundreds of cryptocurrency exchanges around the world, they are the digital marketplaces where most crypto trading takes place. Currently, this kind of exchange can be broadly divided into centralized exchange (CEX) and decentralized exchange (DEX), while most are centralized ones.
However, concerns on CEXs have grown in recent years as hacking accidents seem to be endless. According to data compiled by NBC News, there were more than 20 hacks in 2021 and in at least six cases, hackers stole more than $100 million. By comparison, data from FBI’s annual crime statistics shows that bank robberies netted perpetrators an average of less than $5,000 per heist last year.
Centralized exchanges use a business model similar to traditional institutions like the New York Stock Exchange, setting prices for various currencies and charging some trading fee. However, unlike traditional exchanges who are facing strict regulations from authorities, cryptocurrency isn’t backed by any central institution, which means the crypto assets you are holding are not protected the same way as your money in the bank or other traditional investments.
Some national or local governments are already aware of this issue and have instituted their own regulations. For example, cryptocurrency exchanges in New York state, United States, are required to obtain the well-known and hard-to-get BitLicense before they can operate within the state. Therefore, only licensed companies are allowed to offer certain approved coins. Most other areas have not set up regulations as strict as New York, but some high-profile exchange hacks have shown how easy it is to lose your crypto assets.
The best example must be Mt. Gox, which was a Tokyo-based crypto exchange that operated between 2010 and 2014 and was responsible for more than 70% of Bitcoin transactions at its peak. However, its prominence inside the industry made it a target for hackers, and Mt. Gox experienced security problems several times during the years it operated. Finally in 2014, around 850,000 Bitcoins were stolen, worth about $450 million back then. Eight years later, only less than a third of them have been recovered.
At present, most of the big crypto exchanges have good security programs which are able to provide basic and standard user-level protections such as two-factor authentication or 2FA. After activating 2FA, you will need to provide additional information whenever you log on.
However, as just described, this is pretty much routine and more secure exchanges tend to do more, including but not limited to insurance, cold storage, and bug bounty programs. Insurance means you may be compensated if your coins get stolen from the exchange while cold storage refers to your assets being offline, often air-gapped, and hard to physically access.
As for bug bounty, the idea is to encourage the so-called ethical hackers, or independent security experts, to find system vulnerabilities for exchanges while being offered substantial rewards. This way, hackers tend to report security weaknesses rather than exploit them to steal crypto.
Not all cryptocurrency exchanges will implement these additional measures to protect your assets, except for those that put security first. As one of the oldest and largest exchanges by volume, Gate.io has introduced the Gate.io Bug Bounty Program since July 23, 2019. In August 2020, Gate.io was listed as the best exchange in terms of cybersecurity by Cryptocurrency Exchange Ranking (CER), a third party that evaluates crypto exchange cyber security. Besides, it was also listed amongst the Top 2 exchanges at Coingecko last May with a full trust score of 10, and the highest certificate of 3-stars, which has only been awarded to 15 exchanges. Would you choose an exchange like Gate.io?
To start the journey of cryptocurrency, many will choose a crypto exchange as the first step. There are hundreds of cryptocurrency exchanges around the world, they are the digital marketplaces where most crypto trading takes place. Currently, this kind of exchange can be broadly divided into centralized exchange (CEX) and decentralized exchange (DEX), while most are centralized ones.
However, concerns on CEXs have grown in recent years as hacking accidents seem to be endless. According to data compiled by NBC News, there were more than 20 hacks in 2021 and in at least six cases, hackers stole more than $100 million. By comparison, data from FBI’s annual crime statistics shows that bank robberies netted perpetrators an average of less than $5,000 per heist last year.
Centralized exchanges use a business model similar to traditional institutions like the New York Stock Exchange, setting prices for various currencies and charging some trading fee. However, unlike traditional exchanges who are facing strict regulations from authorities, cryptocurrency isn’t backed by any central institution, which means the crypto assets you are holding are not protected the same way as your money in the bank or other traditional investments.
Some national or local governments are already aware of this issue and have instituted their own regulations. For example, cryptocurrency exchanges in New York state, United States, are required to obtain the well-known and hard-to-get BitLicense before they can operate within the state. Therefore, only licensed companies are allowed to offer certain approved coins. Most other areas have not set up regulations as strict as New York, but some high-profile exchange hacks have shown how easy it is to lose your crypto assets.
The best example must be Mt. Gox, which was a Tokyo-based crypto exchange that operated between 2010 and 2014 and was responsible for more than 70% of Bitcoin transactions at its peak. However, its prominence inside the industry made it a target for hackers, and Mt. Gox experienced security problems several times during the years it operated. Finally in 2014, around 850,000 Bitcoins were stolen, worth about $450 million back then. Eight years later, only less than a third of them have been recovered.
What should you pay extra attention to when choosing a safe crypto exchange?
At present, most of the big crypto exchanges have good security programs which are able to provide basic and standard user-level protections such as two-factor authentication or 2FA. After activating 2FA, you will need to provide additional information whenever you log on.
However, as just described, this is pretty much routine and more secure exchanges tend to do more, including but not limited to insurance, cold storage, and bug bounty programs. Insurance means you may be compensated if your coins get stolen from the exchange while cold storage refers to your assets being offline, often air-gapped, and hard to physically access.
As for bug bounty, the idea is to encourage the so-called ethical hackers, or independent security experts, to find system vulnerabilities for exchanges while being offered substantial rewards. This way, hackers tend to report security weaknesses rather than exploit them to steal crypto.
Not all cryptocurrency exchanges will implement these additional measures to protect your assets, except for those that put security first. As one of the oldest and largest exchanges by volume, Gate.io has introduced the Gate.io Bug Bounty Program since July 23, 2019. In August 2020, Gate.io was listed as the best exchange in terms of cybersecurity by Cryptocurrency Exchange Ranking (CER), a third party that evaluates crypto exchange cyber security. Besides, it was also listed amongst the Top 2 exchanges at Coingecko last May with a full trust score of 10, and the highest certificate of 3-stars, which has only been awarded to 15 exchanges. Would you choose an exchange like Gate.io?
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