Why you shouldn't keep your cryptocurrencies in an exchange?
Cryptocurrency is becoming increasingly popular and with that comes an important question: where should you store your funds? While exchanges like Binance and Coinbase are convenient for buying and selling, they are not always the best option for holding your assets long-term.
Exchanges are a prime target for hackers and have suffered many high-profile security breaches in the past. The most famous example is probably the Mt. Gox hack in 2014, where 850,000 Bitcoin were stolen. Even more recently, Binance was hacked in 2019 and over $40 million was stolen. This shows that exchanges are not invincible, and your funds may not be safe if kept in an exchange for an extended period of time.
In addition to security concerns, exchanges also have the power to freeze or lose your funds. For example, in 2017, the popular exchange Kraken froze thousands of user accounts without any explanation or compensation. This goes to show that you don't have full control over your funds when they are stored in an exchange.
So, if you're not supposed to store your funds in an exchange, where should you store them? The answer is a cryptocurrency wallet. There are many different types of wallets available, including software, hardware, and paper wallets:
- Software wallets are available as desktop or mobile apps and offer more accessibility and convenience than hardware wallets. Examples of popular software wallets include Electrum (for BTC), Trust Wallet (multicoin), and Exodus (multicoin). While software wallets offer more accessibility, they can also be vulnerable to hacks if your device is infected with malware.
- Hardware wallets are physical devices that store your funds offline, making them much less vulnerable to hacks. These wallets are often considered the most secure option for storing cryptocurrency. Examples of hardware wallets include Ledger and Trezor. While hardware wallets offer a high level of security, they can be more difficult to set up and use.
- Paper wallets are simply printouts of your public and private keys. They offer a high level of security because they are stored offline and not connected to the internet. However, they can be easily lost or damaged, so it's important to keep multiple copies in a safe place.
When choosing a wallet, it's important to consider your individual needs and the level of security you are looking for. No matter which type of wallet you choose, it's important to follow best practices for keeping your funds safe, such as using strong passwords, storing your private keys in a safe place, and regularly backing up your wallet.
In conclusion, storing your funds in an exchange may be convenient, but it is not the safest option. Instead, consider using a cryptocurrency wallet to keep your assets secure. With so many different types of wallets available, you're sure to find one that fits your needs and provides the level of security you are looking for.