Did you know that as of today, 3 of the most prominent crypto exchanges are putting $1.5 billion at risk? Do you have an account with one of them?
If you’re reading this blog, you’re probably already familiar with how a cryptocurrency exchange works. You create an account, hand over personal information, and fund your new wallets with cryptocurrency from somewhere else. In return, you can now trade all the coins listed on that exchange. It seems pretty simple and straightforward, but the fact is your funds are at far greater risk on a centralized exchange than you might think.
If you knew how much money highly regarded exchanges were keeping in their company hot wallets at any given time, you probably wouldn’t sleep so soundly. Today we’re going to look into the numbers (and probably freak you out in the process), but we’ll also show you how you can easily avoid all this risk by trading safely from your OWN wallet.
What is a “Hot Wallet”, anyway?
A hot wallet is just a cryptocurrency wallet that is “online”. Most cryptocurrency exchanges function similar to banks. Customers make deposits, and request withdrawals. To rob a bank, generally a thief needs to drive to a bank branch, and try to run off with cash.
Robbing a cryptocurrency exchange however is different; hackers can digitally penetrate the online systems of exchanges, and drain all the customer deposits that exchanges store in their “online” or “hot” wallets. All without leaving the house.
The obvious solution is for cryptocurrency exchanges to not store customer funds on computers connected to the internet. In the industry, this is known as “cold” storage, and many exchanges do it. Sadly, it appears some take it more seriously than others…
Below we entered the public addresses of a few exchanges hot wallets in to Faast to show just how much certain companies are keeping in them. Some of these exchanges also have cold wallets on the side, but the amount of customer funds they are putting at risk is still, uh, alarming…to say the least.
All exchanges need hot wallets to ensure their customers can make regular deposits and withdrawals. But when selecting who you choose to trust with your cryptocurrency, ask yourself: “Do they really need to put that much money at risk?!”
After one of our staff had such a lovely experience trying to get his coins off of this site, we decided to enter their hot wallet address into Faast and see just how much money they’re holding in there:
Balance as of 8/9/18: $63,164,678.93 (USD)
Wow…$63 million+ just sittin’ there. In one wallet. Nicely done, but all things considered, that’s nothing. Gate.io is still a pretty small exchange. What kind of holdings are in the bigger companies’ wallets?
Balance as of 8/9/18: $445,939,660.05
Nearly half a billion dollars, just one private key away from being stolen. “Single point of failure” does not begin to describe what we’re dealing with here.
Ah yes…Big Daddy Binance: the largest exchange in the world. Let’s see how they stack up:
Balance as of 8/9/18: $312,081,504.74
Look at that…over $300 mil in dozens of different cryptocurrencies, all stored in one hot wallet. That’s a lot, but not as bad as OkEx, right?
Oh, we’re not done. Binance has more than one big fat hot wallet just waiting for someone to sneak along and grab those sweet private keys. Let’s check out some of the other ones. (Click on address to see graph in Faast)
Balance as of 8/9/18: $22,469,805.09
Balance as of 8/9/18: $26,002,616.18
Balance as of 8/9/18: $19,975,098.22
$380,529,027.23 spread across 4 wallets…not a single point of failure…just four really big ones instead. Much safer.
So far, OkEx is still holds a commanding lead. Surely there’s no one else out there who can top them, right?
Balance as of 8/9/18: $694,869,909.30
WE HAVE A WINNER! No, your eyes are not deceiving you, that’s just under $700 million being kept in a single wallet by Bittrex. While we can understand that some people get a thrill out of living on the edge, this is just is insane.
We’ve actually been following this wallet for a while. Just a few weeks ago it had over a $1 billion in it. Back in December, it had around $4 billion.
Four. Billion. Dollars.
In one wallet.
I mean, what’s the worst that can happen, right?
Let’s be clear here, we don’t WANT any of these companies to get hacked. That’s not good for anyone. We’re just giving this PSA to alert people about the inherent risks of storing vast quantities of cryptocurrency in any hot wallet. We hope this inspires them to change.
Maybe they will, maybe they won’t. But if they don’t and they get hacked while the majority of your funds are on such an exchange…well, no one thinks it can happen to them…until it does.
A Better Way to Trade
Wouldn’t it be great if you could combine the security of a hardware or software wallet with the accessibility of a hot wallet? Now there’s a way to do just that.
I am Campurro, one of the founders of MonetaVerde Coin.