Is an exchange better to keep the cryptocurrencies than one’s keys? Why?
Cryptocurrency is the current “talk of the town” and is predicted to be the future for many developing industries.
Cryptocurrency is the current “talk of the town” and is predicted to be the future for many developing industries. If you are a beginner, the concept of cryptocurrency can seem a bit of a head-scratcher. So, before diving into our topic, let’s start with a quick brief about cryptocurrency and exchange.
What is cryptocurrency and cryptocurrency exchange?
Cryptocurrency is a digital asset that is developed to work as a medium of exchange. Cryptocurrencies are encrypted with cryptographic codes, that help store, control, secure the currency and conduct a smooth transaction process. A Cryptocurrency exchange is nothing, but a trading business that enables businessmen, exchange their cryptocurrencies for other digital assets.
Basically, there are two ways to keep or store cryptocurrencies. You can either store your assets and the information on an exchange platform or store with one’s own keys. The popular suggestion of an expert is that it is better and safer to keep it on a crypto exchange. Let’s find out more about what he has said and why.
Suggestions of an expert: Why keep cryptocurrency on an exchange?
Changpeng Zhao- Co-founder and CEO of Binance agrees that it is safer to keep and store cryptocurrencies in an exchange rather than on one’s own keys.
He also tweeted on the 19th of January this month and the tweet says, “ Many hardcore crypto ogs advocate storing your own keys. But the truth is, today most people are not able to secure a key even from themselves (losing it). A trusted centralized exchange is #SAFUer for most people. The numbers speak for themselves. Need to work on wallets.”
In May 2019, there is a report of a theft that happened in binance facing a major security breach and is said to have lost 7,000 BTC which is almost equal to $40.7 million.
Meanwhile, there are also some opinions on the challenges of storing cryptocurrencies on their own keys and keeping the keys safe. Let’s take a look at them too, for a better understanding and better comparison between the two.
What are the difficulties with storing cryptocurrencies with one’s own keys and keeping the keys safe?
The co-founder of ethereum, Vitalik Buterin, says he doesn’t agree to people blaming the users about keeping their keys safe and to let the loss of funds because of mismanagement of keys. He states that it is a developer’s responsibility to work towards offering them a secure wallet to secure their cryptocurrencies.
His statement goes, “Disappointed at people replying to this with ‘crypto is what it is, it's your job to be super-careful and write down backup seeds in three places.’ We can and should create better wallet tech to make security easier.”
He also says the concept of “social recovery” can be introduced which will enable multiple people to use the keys in combination, to recover funds.
However, it is also said that the social recovery method has many drawbacks, as there are multiple people involved and there is a possibility of easy hacks. The process consists of a lot of trust factors.
So, taking into consideration, all the above - mentioned suggestions, an exchange seems to be the better option. The demand and competition for crypto exchange platforms are very much alive currently and it is essential that you choose the right platform if you want to develop your own and run a smooth exchange business.
For one such reliable platform, get in touch with us, team Blockchain App Factory, as we have extensive experience with several successful projects on cryptocurrency and cryptocurrency exchange development. We will offer you the most secured platform with advanced blockchain integration and secured wallets to store your cryptocurrencies avoiding any theft/ involvement of third parties. Build your platform with us and join the millionaire club!