Know why the exchange wallet are not safe

Abu-Naim

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Quote from: Su-asa on January 27, 2024, 10:27:36 AM

1. protecting our seed phrase: We can start protecting our coins the first day we protect our seed phrase. It is very important to do this, because with this seed phrase, we can no longer access our Bitcoin when we don't have any means to log in to our Bitcoin wallet.

2. Do not keep bitcoin in an exchange wallet: This is also important to be aware of. A lot of people only think that after protecting their seed phrases, their coins are secured.

The main difference between centralized exchanges and centralized exchanges is mainly the custody of our Bitcoin and our privacy.
centralized exchanges demand for our privacy in form of KYC to be able to completely protect your coin in the exchange while decentralized exchanges didn’t require KYC, as such DEX did not require your personal information, but leaving your Bitcoin in any of them is not advisable because they will be controlling your Bitcoin for you and you did not have full control over your Bitcoin.

To have control over your Bitcoin, use an open source wallet to hold your Bitcoin to avoid any form of scam or exchange hacks.
Learn how to keep your seed phrase or private keys safe.
Avoid using closed source wallets.

Findingnemo

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Quote from: Moreno233 on February 02, 2024, 04:01:35 PM

High transaction fee is the reason many people have resorted to using exchanges for storing their coins. Little do they know that the risk associated with this style is high as everything could just be lost. It is better to pay the high fees than to lose the entire assets.

A high fee is just an excuse given by the people when they can't accept the fact they are ignorant. The Bitcoin mempool is indeed congested but the clog is clear now compared to what we had in a couple of months back and paying a $3 fee is still worth the security of our assets.

Another fact is exchanges never let the users to withdraw by only paying a transaction fee, they always add top off and call it as withdrawal fee even when the fee is 1sat/vb the exchange used to charge $20 to $25 for a withdrawal but good thing is now many exchanges also supports LN withdrawal so it is far cheaper compared to withdrawal using on-chain transaction.

Sandra_hakeem

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Quote from: Su-asa on January 27, 2024, 10:27:36 AM

1. protecting our seed phrase: We can start protecting our coins the first day we protect our seed phrase. It is very important to do this, because with this seed phrase, we can no longer access our Bitcoin when we don't have any means to log in to our Bitcoin wallet.

ain't no way you got a coldwallet separately and your seedphrase gets endangered... If you haven't even had no plans of opening such, then what do you learn in here??

centralization isn't the sole purpose of Bitcoin creation - anything else you get involved is prolly gonna scam you or expose your personal details for money laundering acts, cyber fraud etc... " I can remember the day i slept off, leaving my campaign rewards on binance..."

Sandra 🧑‍🦰

nurilham

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Quote from: Inwestour on January 31, 2024, 12:52:11 PM

The problem is that no one is able to learn from someone else's experience. Almost every user on this forum knows that storing money on the stock exchange is dangerous, but not everyone understands that this can happen to anyone too. Nobody thinks about bad things until it happens to them, I don’t know why this happens, but people actually store their coins on the exchange.

Why can't learn from other people's experience? I think it is possible, many people do it as well. But we don't need to follow put money on stock, we have crypto market and we can put money on crypto coins. Anyway, people put the money on exchanges, mostly they use top exchanges. If there is a guarantee for the exchanges, it is no problem to put the coins exchanges. But if there is no guarantee, the best option is to put on private wallets.

Quote from: Inwestour on January 31, 2024, 12:52:11 PM

I even saw a guy who wrote that the exchange is the safest method of storage, because the exchange is his guarantor of safety, if something happens, hacking or something else, then the exchange will reimburse him for everything, and he really believes in it.

Who suggest to store coins on the centralized exchanges? I think they only suggest to store small amount of the coins and it won't be a long time to put the coins there. I also put coins on centralized exchanges when I want to trade them. But I send again to private wallets if I want to keep them for a long time.

Antotena

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These is what many crypto enthusiast doesn't know, they can't even differentiate between a custodial wallet and non custodial wallet. They trusted centralized exchanges with anything because all they think is mail and password is what they need to protect their money, they don't even think about what will happen to their wallet if the exchange doesn't exist again.

I was reading a reddit post about the reason why people love centralized exchanges and the guy said his reasons is the fees. He doesn't have much bitcoin and he bought it from the exchange using P2P and if he want to withdraw out the Bitcoin, the charges will be much and that's why he left the Bitcoin on the exchange and will sell, he is going to sell easily because the exchange withdrawal fees is much and to deposit again is high due to mempool congestion. His has a point but it's worth if the exchange disappear one day. No thing sweet like personal wallet because not your keys not coins.

sokani

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Quote from: Moreno233 on February 02, 2024, 04:01:35 PM

High transaction fee is the reason many people have resorted to using exchanges for storing their coins. Little do they know that the risk associated with this style is high as everything could just be lost. It is better to pay the high fees than to lose the entire assets.

This is not true. There are some persons that have thousands of dollars stored on exchange, so high transaction fee cannot be the reason why they've their assets on exchanges because they can actually afford the fees. They're completely ignorant of the of the dangers of having their funds stored on CEXs. The screenshot below shows the account of an FTX user who lost millions of dollars when it went bankrupt.

https://twitter.com/Travis_Kling/status/1721985690496291064?t=YhdQh2BlccOC-BOmEk50DA&s=19

Moreno233

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Quote from: Findingnemo on January 27, 2024, 10:31:20 AM

You are dragging too much for what you wanted to convey.

Exchanges don't give us private keys for the addresses and exchanges can be hacked or run away with our cryptos are the two primary reasons why you should not keep your coins in exchange.

P.S: Are these typos "we can no longer access our Bitcoin" and "Do Don't keep bitcoin in an exchange wallet"?

I think you just summarized it, "not your keys, not your coins". This is just the best definition of storing coins in exchange because with this definition, anyone storing coins in exchange should be able to know that it is not their coin as they are not in custody of the key.

High transaction fee is the reason many people have resorted to using exchanges for storing their coins. Little do they know that the risk associated with this style is high as everything could just be lost. It is better to pay the high fees than to lose the entire assets.

tbterryboy

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Quote from: sujonali1819 on January 31, 2024, 01:52:18 PM

Hilarious, from where the exchange will reimburse him if any hacking happens? Maybe the guy is not used to using wallets. And we know exchange always has a nice user experience. This is nothing but laziness. Once he falls into this he can understand and can not find them (exchange) anymore.

Some exchanges and platforms do reimburse their users for the funds they've lost if there is a breach in the overall system or database which means that if the hackers access the database and then access certain user accounts through that, the platform might reimburse the users for the lost funds because it's not from the users' end and it's a lack of security from the exchange or the platform itself and it needs to take full responsibility of what happened.

However, if a user account is breached individually, like an hacker or a breacher manages to gain access to a specific user account either through phishing or any other method, the exchange or the platform would never reimburse the user for the funds stolen because it's user's fault and they are the one responsible for what has happened.

Zigabel

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Quote from: Su-asa on January 27, 2024, 10:27:36 AM

2. Do not keep bitcoin in an exchange wallet: This is also important to be aware of. A lot of people only think that after protecting their seed phrases, their coins are secured.

I have never seen an exchange giving out seed phrase to it's wallet holders so I think this information you gave out isn't correct but as it regards a Bitcoin wallet, it's normal you are given your private key seed phrase and it's your duty to protect them because protecting them means protecting your assets and exposing them also means putting out your assets there in the public which keeps you at risk of loosing them. For a Bitcoin wallet that's not on an exchange, to the best of my knowledge the most security attached to it has to be your seed phrase both for an online and a cold wallet the only way to access them will be through your seed phrase except for the online wallet that can be broken into via certain malware but basically your seed phrase is your first line of security.

Seed phrases can be recovered if lost or misplaced neither can they be changed or request for a new one so it has become very vital that you protect it's s much as possible because loosing it may means loosing your whole assets in your wallet so always make sure to safeguard your seed phrase.

Peanutswar

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Exchange does not give you full authorization with your money and it's not a wallet. This topic discussed many times. Exchange is only used to change your coins into different coins they are supporting wallet balance for people actively making a trade to their platform. Users become confident with their exchange because they think their assets are safe inside it so it the convenient to make a quick flip of the market but the cons of it once the exchange has maintenance, bankruptcy, and other forms considering of losing money.
Instead use a hot or cold wallet so you can have your wallet transfer anytime, you can adjust the fees and of course you don't worry if those exchange gets gone because you are safe with your wallet at.

ultrloa

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Quote from: sujonali1819 on January 31, 2024, 01:52:18 PM

Quote from: Inwestour on January 31, 2024, 12:52:11 PM

I even saw a guy who wrote that the exchange is the safest method of storage, because the exchange is his guarantor of safety, if something happens, hacking or something else, then the exchange will reimburse him for everything, and he really believes in it.

Hilarious, from where the exchange will reimburse him if any hacking happens? Maybe the guy is not used to using wallets. And we know exchange always has a nice user experience. This is nothing but laziness. Once he falls into this he can understand and can not find them (exchange) anymore.

Maybe they are talking about binance since there are times that exchange got hack and they flaunt about the wallet is safe all the time regarding on that incident happen. And I guess people should not believe always with that since even if they say guarantee returning of their funds once there's hacking issue occur still there's a chance that they can't recover then totally they could possibly lost everything they have once this incident happen.

That's why they should learn from those other big exchange hacking where there's a lot of people crying for help to get their money back and they should never fully trust their favorite exchange since anything negative could possibly happen there.

Natalim

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In the first place, we know what we are trying to do whether for storing or trading.
Exchange wallets are just intended for trading purposes only, not storage wallets. Sometimes, we can store our funds especially when we are waiting for the right time to trade but it is just a small amount.

Ever since, we have been aware of the safety of our funds with these exchanges and they can't give us assurance which simply means that whatever happens to them, it also happens to our money. If they got hacked, it possibly included our money. We take responsibility for our funds, not by letting others do it as they don't care.

sujonali1819

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Quote from: Inwestour on January 31, 2024, 12:52:11 PM

I even saw a guy who wrote that the exchange is the safest method of storage, because the exchange is his guarantor of safety, if something happens, hacking or something else, then the exchange will reimburse him for everything, and he really believes in it.

Hilarious, from where the exchange will reimburse him if any hacking happens? Maybe the guy is not used to using wallets. And we know exchange always has a nice user experience. This is nothing but laziness. Once he falls into this he can understand and can not find them (exchange) anymore.

Inwestour

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Quote from: sokani on January 30, 2024, 06:13:40 PM

Don't be naive mate. Aside losing your funds when the exchange goes bankrupt, when it gets hacked or when government shuts it down. I'm surprised you didn't learn anything from the ugly experience some forum members went through when the exchange froze their wallets because they received their weekly signature payment from an address under surveillance by the authorities. Don't make your experience your teacher, learn from other person's mistake.

The problem is that no one is able to learn from someone else's experience. Almost every user on this forum knows that storing money on the stock exchange is dangerous, but not everyone understands that this can happen to anyone too. Nobody thinks about bad things until it happens to them, I don’t know why this happens, but people actually store their coins on the exchange.

I even saw a guy who wrote that the exchange is the safest method of storage, because the exchange is his guarantor of safety, if something happens, hacking or something else, then the exchange will reimburse him for everything, and he really believes in it.

KiaKia

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Exchanges wallets doesn't belong to you even when you created account on the exchange, it's not a non-custodial wallet like Electrum and Trezor, the exchange is holding the key of those addresses and this makes it a wrong practice for crypto investors, till today some people still trust exchanges more than non-custodial crypto wallets for stupid reasons I guess.

You shouldn't entrust your crypto assets into the hands of any crypto exchanges, even if they are the biggest exchanges in crypto space anything can still happen to them, they can fold up or get hacked, but I get it, I am probably wasting my time saying this yet again, as many people trust exchanges more than anything.

Even right after the collapse of FTX many people still find alternatives, they moved funds out of Binance exchange too, but later they start doing the same old thing again, I won't advice them to stop storing coins on any exchange, if you are never a victim of something you probably won't understand how it feels.

Kakmakr

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Your exchange wallet is actually just a temporary repository for coins to enable you to buy & sell (trade) on exchanges. It is in no way a long-term wallet for Crypto currencies.

Those tokens/coins are actually just a digital entry into a centralized database and not actual coins on the Blockchain. Only coins that are deposited and withdrawn from the exchange are transaction that are reflected on the Blockchain... all other trades that are done are reflected on the internal database of the exchange.

Your coins are stored in a hot and cold wallet, that are 100% controlled by the exchange. (They control the private keys to those coins)

uchegod-21

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Quote from: Su-asa on January 27, 2024, 10:27:36 AM

2. Do not keep bitcoin in an exchange wallet: This is also important to be aware of. A lot of people only think that after protecting their seed phrases, their coins are secured.

There's alot of contradictions in your advice. It is either English words are failing you to express yourself or you do not understand so well what you are advising.
First, it will just be fine to say that I shouldn't keep my coins on exchanges and not exchange wallet.
Secondly, you said alot of people thinks after protecting their seed phrase, their coins are secured. How is this related to the exchanges under discussion. Exchanges do not issue seed phrases.
Also in number 1, you advise that we should keep safe oor seed phrase and in number 2, you went ahead to discourage us from number one. It all, I believe advise is gotten but I don't know if people will use it although.

sokani

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Quote from: 2Pizza410000BTC on January 27, 2024, 06:04:23 PM

I just finished your post but I like your advice quite a bit. Here I am one of those people holding his coins in exchange. In fact I used my Binance exchange address instead of my own wallet due to the recent exorbitant increase in Bitcoin transaction fees. Currently my exchange is fully funded by the money I receive weekly. But some say it is safe and most people say it is not safe to save money in exchange. But I also know that one should not invest in any exchange because at any moment we can be in danger. But I will try to invest in my wallet soon.

Don't be naive mate. Aside losing your funds when the exchange goes bankrupt, when it gets hacked or when government shuts it down. I'm surprised you didn't learn anything from the ugly experience some forum members went through when the exchange froze their wallets because they received their weekly signature payment from an address under surveillance by the authorities. Don't make your experience your teacher, learn from other person's mistake.

albon

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Quote from: Su-asa on January 27, 2024, 10:27:36 AM

What if you keep your coins in an exchange wallet and you try to protect your coins and then the exchange collapses? There will be no way to get back your bitcoins. That's why I have said earlier that storing Bitcoin in a secured wallet and protecting your seed phrases are some good ways to protect your Bitcoin. Instead of keeping them in an exchange wallet.

This advice is not to keep coins in exchange wallets. Although everyone mentions it and praises its importance, you find that some do not give it importance. The answer to the question you mentioned is sufficient to make any beginner reconsider again before deciding to keep his holdings on exchange platforms. In the event that these exchanges collapse or are hacked, or their official email is hacked through a third-party email provider, their clients will inevitably be exposed to considerable risks. They may lose their capital and may not receive compensation in the end. In addition to the CEX platforms, they are attacked by regulatory bodies to comply with international regulations. These platforms may impose strict policies, restrict a country from using their services, or confiscate and freeze funds, so CEX should not be a wallet for any long-term investor. There are more safe decentralized alternatives for BTC that do not expose users' privacy and KYC documents.

Abdulzuruku01

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Quote from: Su-asa on January 27, 2024, 10:27:36 AM

2. Do not keep bitcoin in an exchange wallet: This is also important to be aware of. A lot of people only think that after protecting their seed phrases, their coins are secured.

Are users responsible to hold their seed phrases in any exchanges? I doubt it. It is not advisable for us to keep our coins in any exchanges wallet because exchanges are responsible for holding our seed phrases and you can be scammed at any time. Keeping your coins in an exchange wallet is equivalent to giving a stranger your house key, and you can be 100% sure that your mind will never at ease. The only time in which I believe I can advise you should use an exchange wallet is if you are the kind of person who transacts frequently, But you should never keep your coins in any custodial wallet.

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