If you're reading this, you’re familiar with how a cryptocurrency exchange works. You’ve seen the memes, jokes, and a lot of drama related to exchanges. It all seems straightforward — but if you have any funds on a custodial exchange, you’re at risk.
In 2018, a record-breaking $1.3 billion was stolen from cryptocurrency exchanges. You would think the problem ultimately rests on the shoulders of custodial exchanges. It’s easy to pass the buck, blaming these exchanges for storing customer funds on computers connected to the Internet.
However, some exchanges have taken action to improve and upgrade security by providing a non-custodial solution and using cold storage. In fact, many advocates for this higher level of security (including ShapeShift).
While it sucks that certain exchanges take security more seriously than others, it’s time for users to wake up to the risks of keeping crypto on exchange-based hot wallets.
Custodial Exchange — What’s the Big Deal?
- Hackers can access your data and steal your funds. All without leaving their house.
- Exchanges can experience technical problems and you lose access to your funds.
- Exchanges can freeze your wallet for any reason they want — even though it’s your money.
But, that’s what happens when you give away your power to a third-party that’s eager to make a profit. Sadly, it seems many more hacks and tragedies will unfold before there is a large-scale migration toward non-custodial exchanges as a clear solution.
Source: https://www.reuters.com/investigates/special-report/bitcoin-exchanges-risks/
The Original Exchange Hack & Aftershocks
The Mt. Gox exchange hack shook the crypto community to its core and many are still fighting back to attain their lost funds. Even with this lesson learned — what’s different? Not very much. However, we can glean two important truths from this historic hack.
- TRUTH — The obvious lack of security regarding custodial exchanges.
- TRUTH — The bountiful opportunity for hackers, who understandably love the truth above.
“Don’t Get GOXED”
Seriously, this is getting old. How many times will the crypto community get GOXED before realizing that if you don’t hold your coins in your own wallet — you don’t own your crypto.
The expression “not your keys, not your crypto” remains as true as ever.
It’s your sole responsibility — no one else’s — to reclaim sovereignty over your crypto. Make sure you withdraw your holdings from any exchange accounts and transfer them into cold storage. Please, don’t gloss over this.
As you continue on your journey, remember to do your homework. Educate yourself and educate others.
Your Crypto. Your Control.
This is where the ShapeShift Platform comes in. It’s built on a principle that we call “keys-out,” in which you secure private keys, and yet you’re able to interact with the new digital financial frontier easily.
We’re building a non-custodial platform for the world’s future financial system. The stakes are high, but the rewards will be profound.
Over to You
If you’re interacting with crypto, it’s imperative to empower and educate yourself on private key security. Are you ready to take control of your financial future? Connect to ShapeShift via one of our available wallets or create a ShapeShift wallet.