In the largely unregulated cryptocurrency industry, finding out how to transact cryptocurrency securely is important. Read on to find out more.
As the cryptocurrency market expands, many cryptocurrency exchanges have sprung up, each with its own set of tradable tokens. Features, including varieties of deposit and withdrawal options, currency pairs, and fees, are available at each of these marketplaces. But fundamentally, security is a crucial feature that all marketplaces should highlight.
With the market capitalization of digital assets continuing to rise, it is more crucial than ever to keep your holdings secure and trade on reputable exchanges. Thanks to the development of the cryptocurrency sector, exchanges have become much safer.
This is the information you need if you want to know what makes one exchange more secure than another and which ones are the safest. We’ll go over what features to look for when spotting a trustworthy cryptocurrency exchange.
What makes a crypto exchange safe?
Large crypto markets typically have robust safety measures in place. User-level security is rather commonplace and often consists of two-factor authentication (2FA). Once you enable two-factor authentication, every time you log in, you’ll be asked for extra information, like a code sent to your phone through text message.
Users, however, should search for a trading platform that takes extra precautions to safeguard customers’ Bitcoin and other cryptocurrencies. In addition to these common safety precautions, keep an eye out for these three more:
Exchanges must store some assets in “hot storage,” meaning that it is always available online. If you’re concerned about your money, choose an exchange that puts most of its holdings in cold storage. This indicates that it is not online, is usually isolated from the rest of the world, and is difficult to get to.
Your deposits in most banks are safe from loss due to theft or a banking crisis, thanks to FDIC insurance. The FDIC does not cover cryptocurrency exchanges. However, additional insurance for your cryptocurrency is provided on markets that take appropriate measures to protect your funds. In the event it is stolen from the market, you have a better chance of getting your money back.
A bug bounty program aims to incentivize legitimate security researchers (sometimes known as “ethical hackers”) to investigate and report on security flaws in a given system. Exchanges give users reasons to report security problems instead of taking advantage of them to steal cryptocurrency.
Examples of Secure Exchanges
The following exchanges incorporate all three measures:
- Coinbase: This exchange holds only 2% of its assets in hot storage, and all of it is insured. The rest are kept in cold storage. Also, Coinbase runs bug bounties.
- Gemini: Gemini holds most of its coins in cold storage, is insured up to $200 million, and runs bug bounty programs. Also, Gemini users can purchase crypto insurance.
- Crypto.com: Securing all of its assets in cold storage, Crypto.com also has everything insured up to $360 million against theft or damage. The platform runs bug bounties.
- Robinhood: This platform’s assets are insured against theft and are mostly held offline in cold storage. Robinhood a bug bounty for extra security.
Securing your assets with a crypto wallet
Remember that even if you use a very safe exchange, you should still consider a crypto wallet as an extra layer of security.
It is quite unlikely that you will ever see your bitcoin again if the secret keys to your account are lost or stolen. Utilizing a cold wallet to store your virtual assets is the safest option available. That’s the kind of gear you can buy and store away from the internet, making it practically hack-proof.
You won’t have quick access to your cryptocurrency if you store it in a cold wallet because they work offline. Contrarily, a “hot wallet” is a digital wallet you can access from anywhere, such as a smartphone, computer, or mobile device. If you’re looking for a convenient way to obtain foreign cash, this is a viable alternative. A hot wallet is not as secure as a cold wallet, so only keep the funds there that you will need soon.
Investing in cryptocurrency is extremely risky, and that’s why it’s smart to seek a platform that offers safety measures like insurance, cold storage, and bug bounties. You can be assured that you are taking adequate measures to protect your funds if you do so.
There are hundreds of platforms around the world that are waiting to give you access to thousands of cryptocurrencies. We have done the research to pick out the most secure crypto exchanges today.