Topic: Which exchanges use proper security? (Read 227 times)

I remember article about Coinbase security procedures and I have to admit that everything they are doing looks pretty impressive. How much is this security compared to other exchanges it's hard to say because of security reasons such things are not made public.

Cryptopia obviously did not follow any of the basic safety measures, because of ignorance or to save some money, it does not matter at all now. It is always a risk to store coins on exchanges, and it turned out that some less know/used exchanges are much more vulnerable than some big ones.

Why You Need a Physical Vault to Secure a Virtual Currency-Coinbase

How Coinbase Built a Secure Cloud Infrastructure to Store Bitcoin

Firstly, I wouldn't say that reviews/comments regarding Cryptopia before the hack were positive at all. In fact I know of a lot of people who had consistent issues with their deposits/withdrawals due to the fact that wallets of certain coins would often go into maintenance without any updates or schedules. Their support was pretty trash as well.

I think that the best you can do to see whether an exchange has good security is to research yourself. See if they use cold storage, if so, what percentage of coins goes into there (if you can find publicly known addresses). However, information such as how many copies/backups of private keys are there and overall competence of their security teams will be extremely difficult to find.

That's why there's always a risk with exchanges, no matter how professional they appear, and a reason why you shouldn't be storing any coins long term on there. But if they do appear to be professional, have responsive customer support and have a good reputation etc. they are more likely to have good security.


Agreed. Even though decentralised exchanges may be the way to go to solve this problem of security and risk of exchanges exit scamming, I feel like that there are still many features of centralised exchanges that may not necessarily be feasible with decentralised alternatives.

my thinking is CZ sees a market shift towards DEX as inevitable as better tools for real-time trading and market making become available. he still plans for binance to profit from it though. in a hybrid decentralized system (centralized server infrastructure), they can earn trading commissions using the etherdelta model. even with a fully decentralized model (which isn't really possible yet), it looks like they plan to integrate the BNB token, so they may have further plans to monetize BNB.

centralized exchanges will probably retain a solid chunk of the market regardless, so if they attack the market from both angles, they're bound to profit.

I believe Binance DEX is just another name for Binance Exchange. I'm pretty sure they will implement KYC/AML as IDEX does. A vague answer by CZ regarding KYC give clear indication that this DEX won't be what many people expected.[1] So the only difference is we don't have to deposit our crypto to Binance (in theory) to trade[2], but the rest will be the same.

Just another way to make more money and kill competitors to gain more volume.

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[1] https://beincrypto.com/is-the-upcoming-binance-dex-truly-decentralized/
[2] https://cryptobriefing.com/binance-ready-bnb-dex-fray/

They can easily get a lot of money in fees the same way other DEXes like EtherDelta do (smart contracts or hardered codes in the protocol to make it work). They also have their own coin (BNB) which AFAIK will have a important paper in making the DEX work.

I just found this:

Source: https://techcrunch.com/2018/09/25/binance-looks-to-the-future/

If you think logically, launching a dex is against his main centralized exchange, so there must be something that will allow Binance to still make profit in form of fees or something. On top of that, how decentralized is decentralized? I don't trust any of this because you don't shoot yourself in the foot like that, especially with how their Binance brand will organically direct a lot of users to their dex.

I personally prefer Bisq to keep growing and attract more liquidity, which will take some time, but with how exchanges tend to mess up, more people will look for a decentralized alternative. It's not as fast as centralized exchanges, but it gets the job done and works perfectly fine for smaller occasional buy low sell high investors/traders.

DEXs need time to develop. It will be a long lasting process because of how it is not profitable to put all your time into development of something like this. It largely comes down to volunteers dedicating their spare time to it.

On the other hand, it's going to be interesting to see how Binance's DEX will be doing, because that's basically the only entity with enough financial resources to push development through in a timely fashion.

Binance CEO seems legit interested in making sure that it works, so we'll see where it goes from here. Without the crazy hype in the market there is more manpower to allocate to fundamental growth, and that's exactly what we need.

Only the government can request or inspect them thoroughly (at least that's the case in South Korea). But this also creates another problem of trust as we don't exactly know whether the report is objective or not.

Some alternative might be using exchange with open source code like Open Trade, but there's a lack of development and a lot of security issues on the current open source exchange. DEX also lack liquidity, so in the end, we have to trust exchange at some point.

that's the unfortunate reality. exchanges are opaque about their security practices for good reason but as customers, we're left guessing. we can easily rule out those who have obvious publicized security lapses or pathetically bad front-ends, but that doesn't tell us all that much.

i've always tried to hedge against this by spreading around my trading funds to different exchanges, but it's getting less appealing in the age of KYC.


there was a time when they were a solid exchange. i heard they had 800-900 coins listed when they went down---big mistake apparently. they stretched themselves too thin and spent resources supporting zero volume shitcoins that should have gone towards security.

The less outsiders know about how you operate the better. Obviously that's not useful for a customer.

You can only go on track record and comb their comms for clues as to their procedures.

As for Cryptopia they were clearly a piece of absolute shit before this happened. Any site with over 100 wallets 'in maintenance' is not competent, let alone the tidal wave of customer complaints they've had for months.

Most of the exchange service providers prefer to avoid security discussion for either of two reasons:

1. They are amateurs on the hunt for easy money and know nothing about security, therefore, they avoid discussion on the subject.
2. They know the subject and avoid talking about it because they don't want to give any clues to the potential attackers.

We are operating our token exchange for quite some time now and I will try to give you an as much detailed response as I can. But don't expect to get too many technical details because this is a very sensitive subject (for obvious reasons).  

Now I can reveal basic measures we took to maintain a secure environment on einax.

1. As we designed exchange architecture (back in late 2017) we began from designing a secure development environment for our employees and came up with some rules:

• All employees must work full time in the office. No exceptions, no freelancers, no stay-at-home work.
• All employees must sign legally binding NDA
• Developers workstations must be located in secure LAN. USB ports are locked, keystrokes and screenshots are tracked with commercially licensed DLP. Every developer has an additional PC for internet surfing. We use the local repository and dedicated system administrator/dev-ops that impose his rule with Iron fist.
• We follow practice "restrict first, allow when really needed" for everything, starting with internet access for the team
• a Very small fraction of personnel have access to the production environment. Senior management and support staff have NO access.
• All code has to be reviewed before getting in production
• We don't use 3d party code unless we really have to (no known templates, no CMS, no open-source trade engines/snippets/libraries. We don't even rely on infura and host our own archive node for ETH blockchain). We obviously avoid giving away any hints of what tech we use through the apps like https://www.wappalyzer.com/
• We have multi-stage production upload/testing process that never being broken to speed up the process
• Our office have 24/7 security and surveillance on site
• All hard drives are encrypted and stored on-site without ever leaving the building. We have a data-center grade server room, fire protection, power supply, and cooling
• We thoroughly review every line of code of every smart-contract or coin we intend to list

2. We have very specific rules on how to deal with private keys which I will partially disclose:

• We never store keys on rented servers
• We use RAID to store backups
• We don't store unencrypted keys (or unencrypted anything for that matter)
• We don't use standard key storages/formats like wallet.dat
• Keys are separated from the node
• We are doing some other stuff to obfuscate hot wallet activity

3. We have a cold wallet that we won't discuss.

The problem is anyone can tell you they take security seriously but in reality, they may not and it's very hard to tell. There are signs that are a dead giveaway of negligent exchanges:
Stay away if exchange:

1. Raising money for development (Or raised money). This usually means they probably can't afford to maintain a secure environment and will cut costs. Proper security always results in additional costs for your project and you should integrate it from the very beginning. Of course, there are notable exceptions, but overall it is usually clear and visible. It costs a lot to develop and run a secure exchange.

2. Using open source/templates is again indirectly points to lack of funding and be sure - if the company can't afford to develop custom frontend they can't afford to secure their platform. There are of course some exceptions where opensource provides great and secure tools but those are rarely visible at glance. It's fine to find out exchange website using Bootstrap or JQuery but You definitely should avoid someone using free CMS like WordPress/Joomla etc. In general, knowing how it ended for mt. Gox I would recommend avoiding anyone using backend written on PHP.

3. Exchange with bad/unresponsive support. Contact exchange support. Ask non-invasive questions, point at bugs and see how they respond. The good exchange is always up for a healthy discussion, will acknowledge faults and stay friends with you. Don't hesitate to ask anything about their security, because it is YOUR tokens they want to take, and they should answer you what steps they took to keep it safe. Even if you won't get a full technical answer it should never be a taboo to discuss like it is now.

But in the end, use a rule of thumb that will always be valid for crypto: Don't use exchange as your main storage of funds, put your reserve in cold storage and trade with what you can afford to lose. If you want to hodl an asset - withdraw it.

Everyone on the market will keep telling you they are most secure and have an impenetrable defense, but reality is same for everyone - there are NO impenetrable systems, no unbreakable security. There are only things that harder to break than the others. Stay safe!

I bet there's no technical data for this as no one can examine every security system in any exchange, only some phrases that they have like this and like that but in the end someone still breaches the system and worst hackers managed to disembark its funds. You can see some articles/data/chart/table for this on the internet though but idk if how they manage to conclude those rating numbers without weighing the internal security, I mean on how secured the exchange, in backend process.

I don't know how valuable those "Cyber security" ratings are. They don't know the ins and outs of each exchange's security architecture, their cold storage procedures, what they've expended on penetration testing.

No exchange puts this stuff on display -- for good reason -- but I would stick with a reputable and/or licensed exchange that is adamant about holding most of its coins in cold storage. Coinbase, for one. Binance sticks out among altcoin exchanges in terms of reputation but I don't know much about them.

It's a matter of how much millions they spend to protect their system. And continuiously... Or they will end up as a target soon or later. I can't find the post but crypto exchanges still need to make a lot of efforts to improve their security, sometimes it's a matter of basics things.
I found this yesterday or so, on my loal board

https://cer.live/#/rating

And how can the user tell? AFAIK, no one really knew about the stunning incompetence of cryptopia before the hack (apparently large number of hot wallets, no backup of private keys, all private keys stored on 1 server), in fact largely the reviews and comments were positive.