Are Bitcoin exchanges a safe way to buy cryptocurrency?
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Bitcoin – through its underlying blockchain technology – has proven itself to be an extremely secure cryptocurrency. To date, there’s no record of any compromise of the Bitcoin system, and no Bitcoins have ever been stolen.
Bitcoin exchanges, on the other hand, are a completely different story. Exchanges are third-party services that offer buyers and sellers a convenient platform to trade in cryptocurrencies. They are also notoriously unsafe.
Much has already been written about the Mt. Gox fiasco that shut down the exchange in 2014. Coincheck and Bitfinex are the most recent exchanges to have their security measures compromised, leading to millions of dollars lost for their clients.
Coincheck is headquartered In Tokyo. In January 2018, hackers got away with 500 million NEM tokens – a type of cryptocurrency – worth ¥58 billion ($532 US) at the time. When asked just twelve hours after the hack if they had enough security measures to protect their customers, Yusuke Otsuka, a member of Coincheck’s board, said “[we are] doing [our] best but [we] might have come up short.”
The Financial Services Agency ordered the company to invest in its security practices to better protect consumers. They ended up paying Coincheck users the total amount they had lost from the breach.
Bitfinex, which is based in Hong Kong, was hacked in May 2015 and in August 2016. The latter was on a much bigger scale – around 120,000 Bitcoins were stolen in the heist. The losses amounted to $72 million, and Bitcoin’s value dropped by 20% as a result. It took Bitfinex nine months to pay back all their customers.
A Coindesk article explains how all this was allowed to happen:
“Despite the assurances, some observers have blamed the [Bitfinex] for “blindly signing” the withdrawal of nearly 120,000 BTC and wondered why no potential countermeasures were in place in the event of a movement of funds of that size.”
In other words, the exchange had no mechanisms in place to recognize fraud or to stop it. While Bitcoin itself is extremely safe, it is not always clear if third-party traders have the customer’s best interest in mind.
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About Evizone Ltd.
Evizone Ltd. is a revolutionary secure communications, encryption and compliance software and service provider based in Montreal, Quebec, Canada. Evizone offers innovative enterprise solutions in secure messaging (next generation beyond encrypted e mail) and encryption, encryption at rest, regulatory compliance, compliance archiving, WORM compliance, 17a-4 compliance, document life cycle management and communications governance and risk management. Evizone’s services protect organizations through best in class security, encryption, recipient controls, document life cycle management, discovery management, compliance management, compliance archiving, tamper proof WORM and 17a-4 compliance archiving and complete audit records against the enormous damage caused by communications breaches. Evizone’s patented technologies offer a level of security impossible to obtain with conventional or encrypted email and fast, powerful, user friendly compliance archiving. Evizone’s services are immediately available on multiple platforms and provide the strongest commercially available communications security and compliance archiving. You can follow Evizone on Facebook, Twitter, and LinkedIn.
