Following the January 19 incident, when the Euro Pacific Capital CEO, Peter Schiff claimed to have lost all the Bitcoins he has ever owned, experts are suggesting and encouraging users on keeping coins in crypto exchanges instead of storing them in wallets that require security seed phrases and private keys, which once lost, it’s difficult to access their wallet accounts again.
According to Peter’s tweet, his crypto wallet got corrupted hence his password no longer valid, furthermore, he did not have access to the seed phrase to assist him to recover the stored coins.
According to Binance’s Co-founder and CEO Changpeng Zhao, in his recent tweet. He argued that since most people are not able to store their keys safely, a trusted centralized exchange system is the best and “SAFUer” (slang used in the crypto community to refer to safer).
The Bigger Picture
Storing coins in crypto exchanges could be of more advantage to most uninformed investors, according to financial experts. Although this will come with heavy criticism, there is no harm having an open mind while accosting blockchain technology. Depending on the type of investor you are, long term or higher frequency trader, storing your coins in crypto exchanges has its advantages and disadvantages.
Blockchain security dictates that, for users’ coins to be secure from hackers and fraudsters, it is advisable to ensure certain measures are put in place. These measures include; a decentralized system for the crypto exchanges instead of a centralized way, the use of smart contracts together with a decentralized system will add to the security of the users’ coins.
Storing your digital currencies in crypto exchanges has one main benefit to the user, whereby, there is less or no cost of transferring the stored coins when trading. Contrary while using an outside wallet, fees are associated with transferring to access exchange service, which if accumulated can sum up to a large part of your coins.
Crypto exchanges have invested heavily in adding security protocols on their system to keep away hackers and fraudsters, therefore securing users’ coins.
It should be noted that storing your coins in these crypto exchanges, comes with its measures of risks. Since most crypto exchanges use a centralized mode of operation, it provides hackers with an easy time compromising the system and possibly hijacking users’ stored coins. A recent case was observed a few months ago on Binance with the hackers making away with over 7,000 Bitcoin worth over $43 million at that time.
As you know the transactions are irreversible, once the hackers steal the coins, the users most times get to bear the loss.