After the recent exchange hacks of QuadrigaCX and Cryptopia, we wanted to share with you how we take security into account when reviewing and evaluating cryptocurrency exchanges on our website.
We have reviewed the best cryptocurrency exchanges operating in the industry and security is always one of the top considerations we take into account.
Why Is Security So Important?
Cryptocurrency exchanges get hacked, this is part and parcel within an industry which thrives on ever-evolving technology.
The biggest hacks which have previously taken place include the Mt.Gox hack which resulted in $450 million being stolen at the time and the Bitfinex hack which resulted in approximately $73 million being stolen.
More recently, the QuadrigaCX and Cryptopia hacks again highlighted the risk of choosing cryptocurrency exchanges with subpar security.
How Do We Evaluate Security?
There are several factors to take into consideration when determining what the best cryptocurrency exchanges are in terms of security.
Below are 3 fundamentals which we believe are indispensable:
The first question we ask when assessing the security of cryptocurrency exchanges is how they store the funds of their customers. The best cryptocurrency exchanges will store most of their funds in cold storage, which means that the funds will be offline and much safer from the attacks of hackers.
Top cryptocurrency exchanges such as BitMEX will apply additional security measures to funds such as requiring multiple signatures from the exchange founders before funds can be withdrawn. This means that withdrawal requests are only processed once per day. Even if a hacker were to access the account of someone on BitMEX, the user would have time to cancel the withdrawal before it is processed.
Regulated exchanges such as Coinbase and Gemini provide a level of protection to their users that unregulated exchanges will not provide of course. Regulated exchanges have a higher level of responsibility for their customer’s funds and in the event that something happens, the exchange user can be compensated.
How the exchange communicates with their customers in times of crisis is an imperative sign an exchange’s quality and trustworthiness. The best cryptocurrency exchanges are very clear and transparent with their customers, especially in times of crisis. To illustrate this point, there was virtually no communication from Cryptopia regarding the exchange hack.
Moreover, the official announcement only took place a substantial time after the actual hack had happened. The best cryptocurrency exchanges such as Binance have always clearly communicated with customers anytime there have been security concerns.
Do I Have Other Options Apart From Leaving Funds On An Exchange?
Of course! There is the option to withdraw funds and secure them in a wallet that you have private key, so you have total control of the funds.