Cryptocurrency exchanges have been thrown into the fire during the past couple of weeks. The recent NEM hack on Coincheck and the suspension of XRB (non-EU) by BitGrail has left a sour taste in the mouths of investors. Although, exchanges have always been a subject of controversy in the crypto world. A topic bitterly known to users of Mt.Gox circa 2014. The issue with exchanges stems from the same problem cryptocurrencies are trying to solve: centralization.
The basic definition for cryptocurrency goes as this: An electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party (Bitcoin Whitepaper). The trusted third party usually being a centralized bank or financial institution. Those ‘trusted’ third parties are removed in the crypto equation, except in the cases of an exchange.
In the current state of cryptocurrency, exchanges have become the trusted third party service driving this digital system. In an environment where decentralization is the intended solution, the vast majority are using centralized services to buy, sell, and store coins. You’re only as strong as the weakest link in the chain and exchanges are that link. They are a virtual treasure trove for would-be hackers; Storing large amounts of nearly untraceable currencies, connected to the internet in a consolidated way. They are a central storage systems in a decentralized ecosystem.
Hardware wallets are among the safest alternatives to storing your digital currencies. Cold storage wallets like the Ledger Nano S and Trezor provide physical, isolated solutions for storing coins away from your computer. While these wallets are easy-to-use for a tech savvy individual, your mom or neighbor would be less inclined to figure them out. There are similar solutions such as My Ether Wallet, but it brings the same issue to the table: The average person cannot instinctively use it.
Storing your digital currency in a secure manner is important, but the other half of the coin (pun intended) is using your crypto in real-world scenarios. Currently, places like Microsoft and Expedia offer options to pay with Bitcoin, but some would argue the OG cryptocurrency is too slow and fees too high to scale. In fact ,digital payment company Stripe is ending their relationship with Bitcoin citing payment barriers with the coin. There are intuitive payment gateways to send and receive Bitcoin, such as Bitpay and Coinbase, but they lack a variety of other cryptocurrencies, charge premium fees, and don’t provide a full spectrum of services.
In fairness, there are plenty of tokens and dApps in development which will vastly improve the cryptocurrency ecosystem. Services like the Request Network will provide a payment platform used to send and receive payments, invoices, bills, etc. Advances in offline storage and user-friendly pay and request platforms will only help to strengthen decentralization and increase mainstream adoption. Improved services and applications will take our reliance away from exchanges and back into the secure hands of the owner.
While there are plenty of reputable exchanges available today, most should stay cautious in this current, unregulated environment. You don’t know when the next Mt.Gox or Coincheck will come along. What if an exchange decides to close up shop and keep your funds? Steps are being made towards regulation and countries like South Korea are making serious headway. However, the most safe and secure way to store your cryptocurrency is offline. Only use exchanges to buy and sell coins, NEVER to store long term. If you plan on storing your coins for a long term, which most advise, find a cold storage solution which works best for you.
ETH: 0xE3E0a9cA20bA1A6E1B72c7574318070fb47C5050
NEO: AM4oXNQ8UMSkrSUexHx3wAxcc43Fa3gRNX
BTC: 1Msz6AsbppK7HAC5f6ikMZrC5z8KFwozGv
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