Topic: A more to what is display by centralized Exchanges, shareholders and Beginners (Read 145 times)

Being a beginner in the crypto world is not easy at all, and when a beginner is faced with his first crypto investment, we should not be surprised that his first choice will be one of the top 5 CEX. They have found a way to position themselves as an unavoidable first step for most cryptocurrency investors, especially those who do not have the ability to use local crypto-exchanges (which are also CEX), or have no idea that there are decentralized crypto-exchanges (DEX). The latter was mostly criticized for poor liquidity, although I cannot say whether this is still the case today or whether the situation has improved.

The question is what is the biggest problem with CEX - that they have to ask for KYC and take the risk of keeping this data, which can jeopardize the privacy and security of their clients in the event that data is hacked or sold to third parties - or that they are trying to present themselves as crypto banks in which their clients' funds are secured? It is easy to say that the funds should be withdrawn to non-custodial wallets, but the service fee they usually charge is not an incentive in that direction.

However, over time, I think that more and more people will realize that the exchange is not something they should use for long-term storage, but also that CEX will try in every possible way to keep as many coins within its platforms.

• Hacked Exchanges since 2011
• [Updated] List of cryptocurrency exchange hacks
• Not your keys, not your coins

There are many exchanges were hacked, went bankrupted or exchanges made scam exits. One of famous exchanges that were hacked and disappeared is Cryptopia. They have an announcement thread on the forum.

• Cryptopia Cryptocurrency Platform Services and Development

You have your money, use it to buy cryptocurrency but you only own your coins if you store them in non custodial wallets in your own devices. If you leave your coins on exchanges, you don't actually own your coins.

I didn't read the whole AMA, but I get the conclusion that this guy has a conflict of interest.

So yeah he says "Users before shareholders", but if he dumps the latter, Binance is going to evaporate quite quickly since a large portion of their funding would be wiped out.

Plus, this particular exchange has a bunch of legal orders slapped on it to collect user identifying data for national security reasons. In this position, he's not really someone people should be looking up to for beginners advice, but they do anyway, 'cause he has millions in crypto and that's all people care about.

Centralized exchanges are unreliable, stroing bitcoins in a centralized exchange is like leaving your private keys in the open. You think you have your bitcoins secure but really the bitcoins are not safe. It's like using a wallet that is closed source, you don't know what's going on the back end. As you pointed out, a lot of things can go bad . Centralized exchanges can give your information to the police, government bodies, private firms if they wish and slip it in their Tos. The sooner we start using decentralized exchanges, the better for us.

You cannot verify anything with with centralized exchanges, they reserve the rights to change their ToS at anytime and as a user, you have already agreed to any such changes made.
The biggest risks posed by centralized exchanges is not in the case of a downfall, or theft. They could also run an exit scam, or have isolated cases of stolen user funds with no action taken after reports.

The best advice is to basically avoid centralized platforms, particularly for holding funds. There's a much more secure and independent way to store funds in non custodian wallets which gives users full autonomy.

If not for his disappearance, many would have wanted to follow Satoshi's^[1] footsteps in terms of digital currency and everything he/she/they put down on bitcoin whitepaper,^[2] including some great developers who have done so much for bitcoin in their time, but the existence of centralized exchanges has captured the hearts of many, mostly the beginners who love it, cherish it, and can't live without it. We all love exchanges, but I'm more worried about centralized exchanges like Binance and other centralized organizations that provide trading platforms and give hope to users by allowing them to keep their coins and documents in their custody.

Source: https://twitter.com/cz_binance/status/1528794370442420225

I'm used to the forum caution phrase "don't simply trust, do check and verify before you make a move." If I have coins on a centralized exchange, how can I verify the above assurances that shareholders would agree to settle all users before them if there is a downfall? The tweet has inspired many users to stay glued to the centralized exchange, but look deeper, there's more than meets the eye.

I got an alert about an upcoming AMA by CZ in 30 minutes on r/cryptocurrency,^[3] so I went to see how he would respond to some questions about his views on centralized exchanges and, in contrast to what is being said to beginners on how to avoid their coins on centralized exchanges and skip anything related to KYC for privacy reasons.

There were hundreds of questions, and due to the nature of AMA, the important ones I was looking up for answer were ignored, and the responses concerning securities were vague, very misleading, and I was shocked that people upvoted every answer. The mods removed some serious comments, few unanswered comments were responded to by other users, but the responses demonstrate that many prefer centralized exchanges over a hardware wallet, which would cost them less in terms of peace and money. I have included snippets below.

Security and care of users funds under their management
========================================================

1. If users funds are safe: When it comes to the security of assets under their care, centralized exchanges have a way of avoiding questions by offsetting them with insurance funds set aside in case of unplanned events.  Binance, in particular, has a way of saying SAFU, which means funds are safe, but the balances on the wallets are not up to what is in their hot wallets, other centralized exchanges do this in different ways, however reading how quadrigacx^[4] slipped as an exit scam exchange should serve as a lesson to those who feel at home with centralized exchanges.
 

Source: https://www.reddit.com/r/CryptoCurrency/comments/uuitqp/ama_with_cz_binance_ceo/i9fhgpk/?context=3

Some of the largest banks, which were previously at the apex of the traditional financial industry, have gone bankrupt, and nothing has been done to recoup customers' full payments.  It's not difficult to be your bank, make it your key, your coins.

2. If centralized exchanges sometimes get hacked : It is usually easier to keep something hidden from the rest of the world by a single person than a group of people. They wouldn't disclose what happens behind the scene to the rest of the world to avoid FUD but trust me when I say that anywhere there is a huge amount of money that is publicly shown to people, hackers will continue to try, they will keep banging on the wall until it weakens. A hack could also make you lose your documents into the wrong hands, as long as centralized exchanges are managed by a group of people, an insider job might harm them one day. It happens to Kucoin^[5] in 2021, roughly $200 million was stolen, some were recovered.


Source: https://www.reddit.com/r/CryptoCurrency/comments/uuitqp/comment/i9fjdwa/

Your wallet seed inscribed on platinum and concealed in a safe location by you alone is one of the world's top secrets that only you can disclose to people, you don't have to worry about trusting anybody or being backstabbed as long as you did it yourself.

3.If centralized exchanges provide full transansparency: There is no feeling like holding the private key to your assets, for unknown reasons, it may be an advantage if they don't provide full transparency of the coins under them but you have no idea what is going on underground, they don't provide a sheet of their spending, they only provide headlines on partnership.
What if your coins are been spent? It could happen to any centralized exchange and it could be the one you least expect may run some dirty moves with your coins.


Source: https://www.reddit.com/r/CryptoCurrency/comments/uuitqp/ama_with_cz_binance_ceo/i9jmfyk/


Your privacy for government
==============================

1.If centralized exchanges will report their user crypto to the government: If the government demand what you're holding, they're likely to report you, they would not want to lose all of their customers because of a single person.
Giving up your assets may be impossible, but there is a good chance that a centralized exchange can fetch your details to government, always read their terms and conditions carefully. It's not that heaven will collapse if you don't use them, it's for your safety.


Source: https://www.reddit.com/r/CryptoCurrency/comments/uuitqp/comment/i9fn7wv/

Outro
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There are many beginners who don't realize how much it costs them to become familiar with centralized exchanges, they don't realize how essential security and privacy are, some do, but they would rather lose it than maintain it for something that isn't worth it. Centralized exchanges are recognized for there high liquidity, but they have a horrible reputation when it comes to privacy and security, don't KYC or keep your coins on them.

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[1] https://bitcointalksearch.org/user/satoshi-3
[2] https://bitcoin.org/en/bitcoin-paper
[3] https://www.reddit.com/r/CryptoCurrency/
[4] https://decrypt.co/5853/complete-story-quadrigacx-190-million
[5] https://news.bitcoin.com/kucoin-boss-on-strategy-after-hack-we-chose-to-act/