Topic: Never store your coins in a CEX wallet (Read 715 times)

what's even more dissappointing is that these same set of people would rather die than read a documentary/thread to correct their errors... Why should they cry when the aftereffect comes forth??

Readdddd!!!! That's the only way you can be enlightened. I don't even think they're interested in all of your stories, cause several threads like this have been created over the years -- years before now, HTF did I know all of these in just a few years of my stay in here?
Again, this is a problem that would have been avoided, only if they read through every important thread that relates to the best storage pattern. "You cannot eat your cake and have it" -- this, you can only have the best privacy and the most enhanced security system exist independently -- thereby, one being served without the other.

True! I agree it isn't safe and should be avoided.
There are other P2P options however that work digitally, like BISQ and PeachBitcoin etc.
I don't give financial advice of course. Anyone should do what suits them best. The only thing I am saying is that nobody should grumble about losing their privacy if they use CEXs because by definition they require all your data. Which, if you are fine with it, is perfectly fine.

I got you now. Nope, it won't be the same but I will never go that route of meeting someone in person to exchange my coin. It looks like a high risk to me. I don't know if it was safe in the past doing that but certainly it's not safe now. We've seen and read news articles of how people got waylaid or traced to their homes through such.

Anyone is free to do anything they want. But this doesn't mean that I won't express my opinion when I see bad practices. The reason why I do it, is because history repeats itself and many times people repeat the same mistakes. Having seen them in the past, makes me wanna warn people of the dangers ahead.

People are free to do things they want, and with their money, they are free to choose storing their bitcoin in custodial or non custodial wallets.

Whether they had chance to know of "Not your keys, not your coins" mantra in Bitcoin community, if they don't take it into account for their Bitcoin storage practice, they afford to lose their bitcoins to custodians.

If they care about their money, they will care of learning how to secure their money, like their bitcoin in a non custodial wallet with some basic learning and some simple steps to create a wallet (offline), back it up, test backup, funding test, and full funding.

Some people don't do backup test but if they are recommended to do it, they will have more reason to do backup test. Honestly when I used non custodial wallets a first time, I did not test wallet backup. I did made backup but did not test it, and it's my bad practice in the past because nobody told me about this step.

So, if we arranged a meeting in a mall or anywhere and I gave you cash and you sent me bitcoin, would it be similar to giving a CEX my full name, ID number, address etc?


Custodians have full control over an asset that is supposed to be private for each individual owner.

The whole purpose of Bitcoin is not to use intermediaries as stated in the first sentence in the abstract of the whitepaper. ^[1]

What you say, in fact, goes against the primary reason why bitcoin was invented.

If anyone can't safely guard one string of characters, or 12 words, then it's better for them not to own bitcoin.


[1] https://bitcoin.org/bitcoin.pdf

tranthidung is correct. There's nothing like centralized wallets and decentralized wallets. If centralized exchanges have developed their own wallets like the ones you showed above, you can't call those wallets centralized wallets because there's nothing like centralized wallets or decentralized wallets. We only have two types of wallets, which are non-custodial wallets and custodial wallets. The wallets that are being developed by centralized exchanges can't be called centralized wallets, but they can be called custodial wallets because third parties like centralized exchanges have access to the wallets private keys, which don't give people who are making use of those wallets complete access to their assets.

There are stories like this but this year is 2025 and no longer 2009 or some past years ago, with many resources educate people about Bitcoin, importance of wallet backups for recovery later, such stories become less.

How to back up a seed phrase?

The article says that users must test backup too. Backup a wallet is good but not enough, test a backup is another important step.

Some people even lost acces to their emails and don't know what are emails they used for exchange account registration. With them, custodial wallets or non-custodial wallets are the same, they can lose money with all of those wallets.

Yes OKX, just like Binance and a few other Cexs, now have Web3 wallets like our regular non-custodial wallets with seedphrases.

Options two and three seem alike to me. What makes you think that option three is better a choice than two, privacy wise?

Don't forget that we also have instances were coins are forever lost because owners lost private keys or seedphrases to their noncustodial wallets. If those coins were left in Cexs and owners forgot their passwords to their accounts, it won't be lost forever. All they would do would be to activate forgot password tab and then go through verification (in extreme cases) to prove they're the rightful owners. Sadly, that's not the case with noncustodial wallets.

You are right and most beginners are the people who store their assets on CEX because they feel it is safer there and if anything happens, they have someone to hold responsible which most times does not end up so. However, there are still some people who are old in the crypto industry and are still storing their assets in the CEX citing safety as a reason to do so even after hearing all these big hacks and lots more, they are still ignorant of the fact that the CEX can not guarantee the safety of their assets and as such can not even protect their sophisticated exchange from hackers. People still do not take their asset safety seriously as they too are not security conscious as well.

It is even easier to keep your assets under your custody because you will have full access to them anytime you want it, you do not have to fill out any KYC form or provide documents as CEX does. You control your assets and can use them for anything you feel buying or investing in. What one just needs to do is just to download a good and well-secured wallet get their private keys and store their asset there.

Web3 wallets are not decentralized wallets. Centralized or decentralized are more correct to use for descriptions about a blockchain, an exchange, but it is not accurate to describe a wallet.

A wallet is either custodial or non-custodial.
A wallet is either open source or close source.

Web3 wallets are non custodial wallets, but they can be either open source or close source.

Web3 wallets are built by centralized exchanges are more likely close source.

The centralized exchanges are always looking for ways to keep increasing their income, and seeing that decentralized wallets that support multi-chains are getting more popular than the centralized exchanges, even though most of these centralized exchanges that have been active for long still want to make ways for people to trust them with their wealth, which is why they decide to create and also add web3 decentralized wallets so that they can keep their fans and their users.

Newbies, and my colleagues, please don't rely on such wallet with your coin, and remember that Not Your Keys, Not your coins, Don't trust their web3 wallets, I don't think they are open source, and since it is embedded or added with the exchange, they can still have control over your coins; therefore, avoid leaving your coin in such

Many people prioritize convenience above all else, but sometimes, convenience can be very risky, especially for those investing in crypto. One major reason some people still store their bitcoins in wallets provided by exchanges is that it's simply the easiest option for them. Although they are aware of the risks associated with using exchange wallets, they remain unconvinced to make a better choice because they haven't fallen victim to those risks yet.

Newbies here in bitcointalk forum are very lucky because if they actually read, they would never make some wrong choices which involves storing their coins on exchanges.

Although the authorities have managed to seize part of the lost assets on FTX, and despite their recent decision to start distributing to more than 90% of users, and despite the fact that the compensation value has reached 119%, the compensation value is in dollars and not in Bitcoin. Those who lost their assets on FTX also lost the opportunity to double the value of their assets after the last bullrun and therefore they are losers even if they are compensated. This is an example of the risk of using trading platforms as long-term storage wallets. No one knows what can happen in the inner kitchen of any company and there is no guarantee that the company will be able to compensate for the damage if a disaster occurs. Everyone should be careful and aware that the crypto space requires them to be directly responsible for securing their assets from any potential damage.

I 'd hope so, yeah.
In fact, most people wanna do things easily, conveniently and super fast.
None of the above go along with security, because it requires clarity and no rush, to make sure that you eliminate as many points of failure as possible.
That's why I dislike the whole degen web3 idea. Or at least, it's not for me.

You'd think that after what happened with FTX and all the high-profile people who lost their money, they would learn a lesson and store coins in their own wallets.

But no, they want other companies to store their money for "convenience" (!!!) - and they aren't even regulated like banks nor should they be.

It keeps happening over and over again and there's nothing we can do about it other than advising people.

It will cause panic and bank run. Nightmare from CEX can happen because they are scammers or if they have bad treasury management. I don't know nowadays there are CEX with treasury managed only by a CEO. In the past, there were centralized exchanges have troubles when their CEOs passed away with private keys.

Cryptocurrency exchange CEO dies - with the only key to $137M.

It's how FTX users will receive their money after FTX collapse in 2022.

Not your private keys, not your coins. With CEX, you don't have any private key of your coin.
Reminder: do not keep your money in online accounts.

The dangerous case is not that the owner of the CEX will go away with their money, especially if the CEX is huge like binance, kraken etc.
In these cases, the owners are well known to authorities, so this makes it very difficult for them to just run away.

The problem is that since you don't control the money and since these companies are obliged to follow legislation (which is good), they may be forced to:
1. stop withdrawals for some time
2. stop accepting deposits for some time
3. liquidate your assets and send you your FIAT exchange back

So, in summary, you don't control your assets if they are in a CEX.

Greed is not the only thing that can make people leave their bitcoin in a centralised exchange; sometimes it's ignorance and the laziness to take responsibility for their own safety.

Some people consider centralised exchanges to be safer for them compared to taking care of their own key; some people just ignorantly think like that, so it's just about the fee. If not, some will not leave their coin there for as long as they do unless the fee is very high due to congestion.

What leads to choosing to store coins on exchange is the greed to pay high fees on sending bitcoin from custodial wallets, that is why some bitcoin investors carelessly choose to store their bitcoin investment on an exchange wallet, ignoring the risk that comes with using an exchange wallet to store our assets, aside from the fee thing I don't think there is any reason why someone will ever consider exchange wallet over personal wallet for long term storage of coins.

I don't use OKX, but, if they give you a universally accepted seed phrase, like a BIP39 seed phrase for example, then you can take the seed phrase and put it in any software wallet (electrum, sparrow etc.) and retrieve your coins. Which means that you can just withdraw your money without ever logging in to their website. Do they offer this feature? If so, great for them!

If a wallet is close source, you can stop right here. It's enough!

No reason to dig deeper to find information like it is a close source wallet built up by a centralized exchange team, a complete new team, a senior team with good history & reputation, or a senior team with bad reputation like scammers.

Honestly, I see no need to dig deeper for these information. If you are curious, you can do it but it takes time and I don't want to waste my time for searching something no longer important with me and my fund.

Open source or close source, if a wallet is confirmed as close source, I stop my research on it instantly.

Now something concerns me and I do not wish to look stupid in changing the topic title. I know very well that custodial wallets do not provide seed phrases to its users, but in the case of OKX wallet, they are allowing users to generate seed phrases by themselves and certainly has the features of a non-custodial wallet, and since my experience is majorly with them is the topic not better rephrases as this. "Do not trust Non-custodial wallets that are closed source especially those owned by a CEX"?

Let's have a quick thought on this

Just avoid anything that has to do with CEX for storing of your coins. Their so called DEX wallet or exchange that has association with CEX aren't fully decentralized. Trustwallet is an example as they might claim to be decentralized but they aren't open source so their codes can't be verified.

There's a new trick that CEX use, they acquired already functioning DEX products and convert them to whatever they wish but after the acquisition, people don't realize that the project/products that they used to know to be decentralized isn't anymore. For most people they can't do without using a CEX but their uses should only stop at purchasing Bitcoin or altcoins. The rest should be done outside the exchange to have fully control over your Bitcoin.

Yeah, I suggest you changed the topic to suit the narrative imo.

It's indeed a great topic per se and people will learn from your experience in one way or the other. Wallet associated with exchanges are not entirely bad but you must know the risk involved. Keeping your funds/assets in such wallet is not in any way different from saving your money in the traditional banks and there's chances that the exchange might face attacks and your funds are in danger too. Advisably, you should always send the amount you want to use instantly to exchange and keep your main asset in self custody wallet in which you have the private key.

Non-custodial or also called as self-custodial, means the wallet private keys/ mnemonic seed are given and owned by the user, and user can download, verify and install that wallet software and create a wallet offline.

Open-source means the user can review the wallet software source code, or the community can do it as the wallet is reproducible with open-source code, and there are many reviews about it like the following wallet reviewing website.

https://walletscrutiny.com/

I appreciate the detailed explanation from you concerning the exchanges and wallets, maybe I mixed things up earlier. I don't really know if it's right to change the topic now to the one you pointed out??

Custodial wallets have dealt with me in the past and I learnt my lessons the hard way and I think others need to know, prompting me to put up this topic.

I understand your points perfectly because I have had similar experience with both Binance and OKX. However tranthidung was also correct in his correction. He was trying to make you familiar and know the difference between a wallet and exchange. When it comes to wallet types, it can either be custodial or non custodial but if it has to do with exchanges, that's when you have centralized and decentralized exchanges. You seem to mixed both together while there's distinction. The wallets associated with these exchanges are known as custodial wallets because you allowed the CEX to keep custody of your wallet seed. In that regard, your thread ought to read "Never store your coins in custodial wallet".

Back to your discussion, I still can not trust wallet that emanate from these exchanges even if they claimed it is fully non custodial wallet. They even have option to import your other wallets from another source. I can't remember creating a wallet on Binance aside using their exchange services but was asked to input the keys to recover my wallet or create a new wallet but will lose all assets in the previous wallet. I had to create another one knowing I have no assets in the said precious wallet. In fact, I don't even know when I created it.

I already know they are independent from your exchange account thou. I won't still advise anyone to keep their assets in the exchange claimed non custodial wallet because they can not be trusted. I created the wallet to perform a task that required it and not because I want to use it.

You might be using the terms custodial/non-custodial and centralized/decentralized wrongly. Let's leave centralization vs decentralization alone for a bit. What you want to use is a popular non-custodial and reviewed open-source wallet. Why? Because you are the only one who owns the keys and enough people (hopefully) have checked and determined that the wallet is safe. The exact opposite is a custodial wallet, which is nothing else than an account that you can access, but in order to spend from that account, a third party has to allow you to do it.

Enough about custody. Let's mention a few words about decentralization. A wallet must not be decentralized for it to be non-custodial. Let's take Electrum as an example. It's non custodial and decentralized in the sense that anyone can run their own Electrum server, you don't have to rely on a primary server, and you can connect to a long list of servers operated by other people. But if Electrum only allowed you to use one server that they operate, it wouldn't affect the non custodial nature of the wallet. You coins wouldn't be less secure on the blockchain because the wallet and its servers are just windows that allow you to see what's on the blockchain. Those windows can break or be dirty and not display correct information, but it doesn't change the truth that is on the blockchain.

A decentralized wallet is a protection against a single point of failure. If you can't see out of one window, move on to the next one. It has no effect on the custody and security of your coins as long as it's a non-custodial wallet.

Storing in cold storage doesn't have to do with privacy, but with security.

So, buying from a CEX, using KYC and then sending to a cold wallet, doesn't erase history. This means that there is a submitted transaction in the audit records, where you (the real you) used X amount of dollars to buy Y amount of BTC and then withdrawed this amount.

My opinion is that if you choose to follow the pattern above, there is nothing wrong. Just be aware that there is no "privacy" in this.

For me the problems start for people who buy and hold BTC on CEXs. Because this can be proven devastating in case the CEX decides to prohibit withdrawals. Essentially you have a false idea of "owning BTC" where in fact you "give your BTC to a CEX to hold it for you".

So to summarize:

1. Buying with CEX and holding BTC there: BAD security, BAD privacy
2. Buying with CEX and holding in your own wallet: GOOD security, BAD privacy
3. Buying P2P and holding in your own wallet: GOOD security, GOOD privacy

However, even if you do the (3), there is nothing to guarrantee you that you 'll be perfectly secure and private. You just increase your levels of security and privacy expotentially.

Now, finally, if you ever wanna choose from the 3 options above and you can't do (3), please never consider even for a second to choose option (1) instead of (2).

Keep this mentality and you will be good: Money in CEXs can just be considered lost money and if you are lucky, you may get them back in the future.

It's good to separate your coins in more than one wallet, even in Bitcoin, it's good to have your surveyor coins in an exchange and you're holdings in your DEX wallets. It helps you limit your access to your main storage and reduces the rushed of it being compromised, furthermore you can still split your holdings into two DEX wallets to avoid putting all your eggs in one basket.

I like the idea of keeping Bitcoin and altcoins separately, separation of various concerns is very beneficial in the crypto space for precision purposes.

Finally, something on topic after all the NOISE I scraped away. Keeping your coins in a CEX is dangerous I agree, and keeping it in a CEX wallets with seed phrases thinking it's DEX is a very big mistake. We need to prioritize non-custodial and privacy offered from open source DEX wallets to further enhance the security of our coins.

You are very correct. The Op, looking at his history does not understand many things and misleading people about bitcoin investment. The first thing to understand in bitcoin is the basic concepts of bitcoin and such "What is Bitcoin?" Year of creation, year of launched, what the Bitcoin whitepaper talked about bitcoin, then where to buy and store bitcoin. And be able to identify the differences of custodial wallets and non custodial wallets.
Exchanges are not wallets but they have wallet address. But they can be called Bybit Account, Bitget Account. They are accounts because we open account with them and submit KYC to be bonafide user of the exchange. There is no seed phrase in those  exchanges as a user but the creators of the exchange control your account. Exchange has many functions, trading, buying and selling and they are called custodial wallets and it is called custodial wallets because you can buy Bitcoin and keep it there for a short term investment and sell it out within a short period of time but it is not advisable for long term investment. Though Op does not believe in short term investment, in fact he believes that there is nothing like short term investment and if it is short term then it is a trading. So he only have long term investment and trading and that is also misleading information.
And another way one can buy Bitcoin as stated clearly in the whitepaper is p2p. Where one can purchase Bitcoin direct to his self custodial wallet without third party exchange (a.k.a. CEX). But it is good you use CEX for either trading, buy and sell for short term. While Non custodial wallets for long term hodling.  Keeping Bitcoin in CEX is dangerous because it can be frozen, seize, blocked or site or app collapse. And that is where " Not your Key, Not your coins" phrase came to an existence.

Yeah , the thing is that the reason some folks still prefer holding on exchanges is because they don't have proper knowledge on how this space works (crypto space).

I can use myself as an example back then I was still new in this space I usually store or should I say hold my tokens in Cex wallet until , I found this forum , I now began to see the beauty of privacy.

Now I don't even think of holding my Bitcoin on exchanges, I now hold my tokens on Dex wallet I know is not to save there but Hardwallet kinda expensive but with time am going to get one some day , to secure my funds well ( though there are still disadvantages that's why one need to apply caution) .

Another thing I dislike Trust wallet is it allows users to store both bitcoin and altcoins that is convenient, but personally I see it is not safe practice.

My approach is different, I use a wallet to store only bitcoin, and other wallets to store altcoins. I never want and actually use one wallet to store both bitcoins and altcoins. If that wallet is compromised or if that wallet software, extension has technical issues, I can lose my bitcoin. I value bitcoin more than altcoins and I don't want to put it into one basket with altcoins.

As much as this advice is openly available for all to read and see everywhere and the bad legislation in some countries of course a CEX is a no no, unfortunately I think what pushes many to store coins on a CEX are things like high transaction fees and people want to cut on these, hustles like peer to peer trading (p2p), leveraged trading, and for obvious reasons "stubbornness "**guilty for this one**

But of course,  if you are going to be storing coins for the long term then opt for cold wallets to give your coins a safe haven and your own peace of mind.

I understand what you mean but I think the right word is Custodial and Non custodial wallet instead of decentralized wallet.

I have also seen Exchanges develop their own web3 wallet within the same exchange platform which they believe is different from the main exchange wallet and they make people believe that with the seed phrase it is actually a non custodial wallet and that people assets are not under their control but I don’t buy that at all.

I will not advise people to believe and use exchanges wallet they should make use of a non custodial wallet not linked to any exchange at all, but many people who don’t have this knowledge will always fall for this and believe the wallets are actually safe. Centralized exchanges wants to make people believe that their assets are safe in their hands but since people are not storing coins on their platforms they now came up with this wallet of a thing.

Some centralized exchanges are trying to drag people attention to their wallet they call decentralized wallet, which to me is just a wallet they are still controlling, and the main reason for these keys is to allow you to be able to use multiple wallet with different seed phrases; but in my own understanding, they are still in control of everything because I can see that for OKX you can switch activities from either using the wallet or the exchange which simply means that they can short all of them down when they wish.

I never try any of their seed phrase in other so-called decentralized close source wallets, but I don’t think these wallets are safe, it will just be the same as leaving your money in the centralized exchanges.

I'd advise against having your funds on a CEX because it's not safe, except of course you're a day-to-day trader. If Binance gets hack or shuts down by the authorities, you could lose your funds.

Unstoppable wallet is a non custodial wallet that supports multi coins and comes highly recommended. Should incase you want to go for it, don't forget to download only from the official website.

I'm not sure he's talking about Trust Wallet, I think he is talking about another wallet, the official one from Binance(Binance Wallet) otherwise he would have clearly named it IMO. Anyway, Trust Wallet is not open source so I agree it shouldn't be used as a cold wallet, but if you don't need to hold much funds on it, I think it's a pretty good multicoins hotwallet offering interesting and convenient features for Web3 especially.

Well, in such cases where the platform allows you to withdraw your assets, it might not be that big of an issue; however, despite this fact, it's not a very good idea to keep your funds in a centralized environment because then what's the point of using cryptocurrencies? If you are a trader and you use a specific amount of funds for your trading activities on a daily basis, that's a different thing, but keeping your assets in a centralized exchange or wallet with the intention of holding them for the long term is a bad idea.

When it comes to web3 wallets that most centralized platforms, such as Binance, Bitget, and OKX have these days, I don't think many people use them for storing their assets, these wallets are only good for testing or using web3 services and platforms where you connect your wallet to do certain operations and only fund such wallets when you need to do something.

Yup, I do agree, if you are planning for a long-term holding above 2 years or even above 1 year make sure to never choose any Centralized exchange wallet, it's better to hold funds on the decentralized open-source hot wallet if you don't have the cold storage or your portfolio size
doesn't require cold storage.

Just for the sake of information, Bybit announced today that they are disabling their services so this is what happens most of the time when you hold your funds over a long period due to regulatory issues platforms shut down their services. Even in some worst cases when exchanges get compromised your funds are gone forever like Wazirax Sacam in India..

If they are a centralized exchange, it's very slow chance that their wallets are open source. Binance acquired Trust wallet years ago and Trust wallet is close source.

Binance tried to say Trust wallet is open source many times, but you see it is truly close source.
https://walletscrutiny.com/?platform=allPlatforms&page=0&query-string=trust

Another review on Trust wallet.

Ive used non custodial wallet of binance but never sure or check whether its an open source or close one so Im still putting my asset on those reputable one like metamask for example.

Id also have funds on cex for the purpose of selling and p2p for my sake and some trading orders. This is true my biggest port was stored non custodial wallet for safe keeping.

I myself am still safe placing my funds in Binance until now even though as you said above that nothing is perfect and sometimes it is also stolen by thieves.

And regarding the announcement of theymos in 2022 as conveyed by @apogio it seems that the Unstoppable wallet is also easy and convenient to use.

If they freeze BTC withdrawls, i  can always convert to other crypto and pull out. It has happened before, even on binance. They didn't maliciously freeze a crypto, rather had some maintenance just when i needed that cash.
So i converted it to something else, and got it out. Even was in some minor profit due to conversion

As long it is sponsored by them with complete doubt it is still under their field.

For those who DCA, it is normal to hold initial purchase for that short time before sending out to decentralized wallet.

Assets on exchanges comes with different risk, personal attack and hackers going through the system to steal funds. No exchange is perfect to escape this attack but for that little time holding in exchange should be done on well known platforms not the minority on the list of exchanges.

Exchanges and exchanges owned web3 wallets as they say, it's never worthy to keep the coins there. If someone trades from time to time then there's no need to warn them because even if you tell them not to keep coins in there, they'll still do it because they have to.

What matters is not to keep the most of the portfolio that they have in it. The balance or amount that these traders need on the exchanges should be the amount that they only need for trading, nothing more, nothing less.

Well, and the same goes with the wallets that are owned by exchanges. I'm better using my hardware wallet instead.

This bad practice can happen with beginners and experienced people, because if they are careless, they will store their coins on centralized exchanges which have undeniable convenience.

They can understand about risk but their are other things to decide their decisions on where to store their coins.
Reminder: do not keep your money in online accounts

Electrum wallet is an open source, non custodial, that is good, but it is SPV wallet and does not require too much storage space on your device.

Best wallets for desktop and mobile.

some who still store their assets on the exchange are beginners, but those who have trading interests I am sure still store their assets on the exchange.
past events can give us valuable experience not to store assets on the exchange. beginners who come to invest or trade must also know such information. do not just trust exchange advertisements as a trusted platform.
exchange is not a platform for storing assets, even if you want to store them in a wallet, of course, we have to choose the right wallet. I use Electrum.

The reason is simple, for easy trades. Most of those who don't have intention of keeping their coins for long often prefers to store their coin in exchanges since they will need to trade it within a short time, and we can't really blame them reason being that there are times when you will want to move your coins from a self-custody wallet to an exchange, it will attract high gas fees or a congestion in mempool which will delay the transaction. Storing coins in exchanges is not advisable but if you don't have any plan of storing your coins for a long time then there may be need to just move it to an exchange for easier transaction whenever you are ready. 

Almost everyone already knows that even storing assets in the best decentralized wallet, but in reality many people still store assets on exchanges. There are two possibilities why many people still store cryptocurrencies on centralized exchanges, maybe they only have a few coins and the second may be because of the cost issue when sending to a decentralized wallet so they store cryptocurrencies on centralized exchanges. In addition, they store cryptocurrencies on well-known exchanges such as Binance Bitget and OKEx. But in fact, all centralized exchanges have high risks because all our assets are controlled by them and many exchanges have collapsed or gone bankrupt in the end many users have lost.

There are still many people who think this is normal, because the assets they have are small they ignore security, even though from the small assets we must learn to store them in a wallet that we can control ourselves. Likewise with the problem of costs, they should have the mindset that costs are not everything, the most important thing is that their assets must be safe. So indeed we should get used to storing assets in a wallet that allows you to have full control over your own coins rather than using a CEX wallet that is controlled by someone else and that is very risky.

About OKX, I think it's because both the OKX(exchange) and OKX(web3 wallet) could be accessed in a single application that's why you thought they were interconnected. But I would have expected you to spot the differences since you need to generate a seed phrase to create a wallet which is what the OKX(web3 wallet) requires and an email and password for OKX(exchange). If you'd backed up your seed phrase you would have been able to recover your funds when your import the seed phrase in the OKX app or any non custodial wallet.

For long time people in cryptocurrency world have known that it is best to keep your coins in special kind of wallet means in decentralized wallet. This is better than leaving them on centralized exchanges. Some big websites like Binance Bitget and OKX are now offering wallets that look like decentralized wallets. They even give you keys. But it is very important to remember that these wallets are still controlled by these websites and we do not have full control over your money. Electrum and Blue wallets let you have full control over your coins and they are safer than using wallet controlled anyone other like any CEX.

It is nice you brought up this topic and I believe it would also enlighten both the old and new members because it looks a bit confusing and people wouldn't understand what the CEX are up to. I have had this thought in the past and I had to do away with it because I will not for one day in my right sense make such a mistake of using a wallet from an exchange with them claiming it to be a self-custodial wallet which we all know is not true.

Any wallet which is issued by a CEX is nothing but a big trap to get at people. You might think it is a self custodial wallet but in the real sense,it is not what you think and I will not be surprise in the nearest future users of such wallet would start complaining of it being hacked and their funds stollen. Do not believe what they tell you about those wallets as long as they are in charge of if, their is no guarantee of the wallte safety. Be wise and avoid such wallet.

This is a good topic. Thank you for shedding light on the need to avoid CEX and their wallets when storing assets. Anyone who wants to use the Web3 wallet provided by these exchanges should create an account on the exchange to open a wallet and adhere to the wallet's terms of use. Indeed, they have control over whether the wallet is custodial or self-custodial.  

Anyone who prefers decentralization should completely avoid these wallets managed by CEXs, as they offer a middle ground solution, not a complete one. Using an open-source, non-custodial wallet is one of the safest and most feasible solutions.  

I don't know why any long-term investor would choose these exchanges and their wallets when many alternatives are available like hardware wallets and other non-custodial wallets. Is it due to a lack of experience, or what?

Sometimes people think that its easy for them to dispose their crypto stored on exchange when they want to sell it that's why they decide to use those platform to store their funds.

They ignore those risk presented to them and they are comfortable that the exchange is trusted also won't scam their user. This thinking is really wrong since we don't know on when those exchange remain to be trusted. That's the reason before those scary thing happened and got a problem with scamming. They better secure their funds on their hardware wallets so that they can make sure that their funds is safe and have full control of it.

If you have money to invest with crypto why not secure your funds, a hardware wallet is a must right now, because even though the exchange gives you a passphrase, you cannot call this at yours like you don't have the full utilization with your funds. In a hardware wallet at least you can say that you have your wallet that even offline you will feel secure not connected to the internet and have a safe funds and  keep your seed safe. Imagine the peace of mind it can give to you that you can store your funds without too much thinking being compromised or might be lost. Well, not unless you forgot the seed where you put it and got stolen your seed.

Hopefully this situation https://www.investopedia.com/news/largest-cryptocurrency-hacks-so-far-year/ will give a reminder for people not to store their coins on exchange.

Since they might lose their funds especially if the exchange cannot pay their depositor if they experience to lose a lot of money. There might be some people say that they are SAFU with big exchange like binance, but they would never know how long they remain like that. So secure their coins on the wallets they have full control and avoid using any third party platform then leave it there. Because as being said Not your Keys, Not your coin and people need to realize how important to acknowledge that word.

It's usually like that where majority of people will change their mind about cex when they experienced it themselves that's why no matter how much we remind them is that they don't even take it seriously. I can say that they do trust people who owns the cex since they are storing their coins on the exchange when we know that it isn't really safe to store coins on a platform that you don't have full control.

Maybe the CEXs has had enough of the criticism about not your keys, not your coins. And they have come out with a different approach something I would refer to as "semi-decentralized wallet" hehehe. The obvious is that, if it's not a decentralised noncustodial wallet then it is not, because there no difference in giving the owner of the CEX account a private keys while you the CEX still do have access to it too. What's private about that?

We never said that you will inevitably lose money on CEXs. But, we said that your money is not guaranteed. It's not yours. The only thing you have is a contract the Binance ows you $20k.
Yes, they 're probably never going to go away with your money, but if they decided to freeze bitcoin withdrawals for 10 days, there is nothing you can do, even if the money is yours.

This is indeed true for 99% of the CEXes out there. However, there are few exceptions. Namely Binance. I've had crypto in amounths of $20k there for years now.
Never have i had any issue or any funds lost.

Even with this idea of having to store your coins on centralized exchanges until they are big enough to pay fees on them and have them transferred to a decentralized wallet doesn’t work. I say this because, the movement it’s big enough or close to that, you’re already taking a risk you wouldn’t have liked to take.

Also, it’s easier to save little or small amounts on decentralized exchanges than centralized exchanges. Centralized exchanges have deposit limits of which, should you happen to send coins below that defined limit, the coin is lost to you. In the case of decentralized exchange, there is no limit what so ever. You just be cool with the fees which is usually far less than what centralized exchanges would require of you.

Reasons far from storage would account for users having to have their coins on centralized exchanges. Maybe for trading, swap for other coins or exchange for fiat and not storage, that would be so wrong.

It's expected though, as there's no way everyone will toe the same line given the same event. There are bound to be dissidents in everything in life. However, the way I see this storing coins on exchange thing, is if those doing it aren't trading it there; then they seem to be ignorant of the unnecessary exposure they're putting themselves through. If they're trading it on Cexs, then it's not a bad idea. Nevertheless, we can also see the whole thing; whether storing on exchange or on web3 wallet as risky. Hacks and lost of funds can happen with either of them.

I like the way you said Centralized wallet and Decentralized wallet, instead of Custodial and Non-custodial. These words make it easier for beginners to understand the language you convey, and this also happened to me when people around me asked what the difference was, and I also told them by using the terms Cex and Dex to them to make it easier for them to distinguish, and when there are people who already understand it so well then I use more precise language such as custodi and non-custodi.

And of course I still recommend using a non-custodian wallet for security, because we don't know what will happen in the future to a Cex, even though some Cex have Proof of Reserve, but it still has loopholes.

Web3 wallet of Binance is decentralized, although not open source. The bitget wallet is also decentralized but not open source, just like trust Wallet, owned by Binance, TW is also not so open source. I agree that we must chose wisely and open source wallets but saying these wallets are still controlled by the exchange is not right, I mean these are non custodial wallets nothing bad can happen or at least nothing bad happened till now.

Overall I agree we must follow your suggestion as it is the best and I also love the slogan we don't own the keys we don't own the funds. cases like FTX can happen but I suggest we must choose exchanges wisely like who the team is and how experienced they are and from my POV coinbase and Binance is not going anywhere.

Binance wallet is on telegram now and gaining attention with referrals and BNB rewards. Bitget wallet started exactly this way before launching their separate wallet app, but I've experienced that of OKX demanding seed phrases to recover my washer tied to my exchange account first hand and with all developments I'm seeing I decided to put up this thread to warn especially newbies to be alert. They would all have more upgrades soon and make lots of newbies preserve funds in their separate wallets and that's why I'm creating this thread tho warn them before hand. These CEXs are all moving pretty fast.

Yeah definitely. Most people don't know anything about what bitcoin (or even crypto) is. The only thing they hear when someone says "Bitcoin" is: "when moon?"
Too much effort and too many thoughts about getting rich quick. They don't care about the means, they only care about the result.
Let's make an experiment. Go tell someone that you know and trusts you that you have found a way that could potentially make them rich (and it's not a job or business idea).
8/10 people will trust you and try your suggestions.

Centralized wallets as binance I've known has only provided users with Centralized passkeys which has only served to give users limited custodial to their funds in the wallets.
Don't get this private keys twisted to be self custodial Private keys which you're to be self control of your funds.
Besides instead of the Central exchange to pose they've dynamic wallets features as Dex and Cex it'd be more security wise to embrace the non custodial specifically.

I know what I'm saying sir, in order to send funds from my OKX wallet to it's exchange I pay transaction fees and recently I lost my phone and when I tried retrieving my wallet, I could only retrieve my exchange which was binded to my email and keys were requested before I can have access to my wallet.

I initially thought they were intertwined and the wallet is merged with the exchange since it's the same entity, but I found out there was a clear distinction between the two and I lost all coins in my OKX wallet while my exchange was intact because I didn't have the keys.

These CEX, some even now have different application for their wallet versions and you can store coins in both their exchanges and their wallets differently.

Consider the image below for more clarification

Exchanges deceives the newbies in a way they think exchanges are also wallets. Some people do not know there is something called wallets. I have some friends that use the words interchangeably. Some people will call an exchange a wallet. Only few people have the knowledge to avoid loss during exchange hack.

But it is good to know that not all funds on exchanges are hold there, some people are trading and their trading funds are on the exchanges.

You did not fully understand what you wrote as your advice to others. Be more careful and more accurate next times!

There are custodial and non-custodial (aka. self-custodial) wallets. There is nothing like centralized wallets and decentralized wallets.

You can store your bitcoin in centralized platforms as CEX, and in custodial wallet but remember it is not a centralized wallet.

This is correct!

Bitcoin Q&A: Not your Keys, Not your Coins

It's important, no doubt.
But I think that theymos's announcement in 2022 explains it perfectly.
It's good to remind newbies about it though.
It's disappointing that still the great majority of people store coins on exchanges.

The correct discipline have always been to purchase coins or consolidate small units of coins eg. BTC on CEX until it's big enough to pay transaction fee for it and send it to a decentralized wallet for preservation and the correct slogan I've always known is "Not your keys, Not your coin".

However, recently CEXs like Binance, Bitget and especially OKX are introducing their own wallets looking decentralized by issuing keys to it. I know those wallets are still in full control of the CEX and not the investor. It is better to go for decentralized wallets that are open source instead of preserving your precious coins in the wallets of CEXs which you have limited control over.

CEX wallets are centralized and those keys are just a camouflage. Use open source decentralized wallets like Electrum, Blue wallet e.t.c. to have total control over your coins.

Be Warned and Be Wise while making a decision on wallet to preserve your coins.