According to Chainalysis, direct theft of crypto surpassed US$3 billion in 2021, a fivefold increase from 2020. And scammers managed to lure over US$7.5 billion from their victims last year!
No one wants to lose their funds, but today even crypto veterans are suffering, which begs the question: Who do we trust more with our crypto, ourselves or exchanges?
As the name suggests, Cryptocurrency is designed to be secure, but like with anything encrypted, be it passwords, a wallet or other computer code, it is only as safe as the practices of the person using it or writing it.
If you follow the news, you will have seen that new protocols have their security flaws exploited, with massive amounts of ETH stolen even today. In addition, some exchanges suffer hacking events, and people are still falling victim to clever scams. The bottom line is that crypto is a target, and hackers/scammers are not going away.
Here we will talk about how even the most experienced are not immune to scams and address the pros & cons of private wallets vs exchanges. Why? Because it is a hot topic and worthy of discussion. Let us begin.
We are human, and humans make mistakes.
Let´s face it, everyone gets tired, has bad days, argues with their spouse and clicks things when we are not fully present. And unfortunately, sometimes, that is all it takes to lose all your crypto.
People are used to banks where all we have to do is remember a four-digit pin and sign our name. Simple in comparison to crypto.
The digital world is inherently risky, no matter the technology you are using or your experience level. And, as mentioned above, tech is only as secure as the practices of the people using it.
Good questions to ask yourself include: What is the risk to reward ratio? Is this the right choice for me relative to my circumstances? And, how can I better protect ourselves?
Private wallets vs exchanges
Private wallets represent the essence of crypto, while exchanges have enabled people to easily buy it, transforming crypto from a somewhat underground movement into a global phenomenon.
Both have their role as well as advantages and disadvantages.
With a private wallet, the user has complete control and with that comes full responsibility; you are the single point of failure. On the other hand, an exchange acts as a custodian. As a result, you have less control and, thus, less responsibility; a group of people, their protocols and tech are the failure points.
Helpful information about good security practices is abundant online. In addition, we can buy technology to help secure our digital life, such as password management apps, phishing blockers, etc.
However, the reality is that most individuals simply cannot afford to employ the security measures that exchanges can.
Kraken is one of the few exchanges which has been around the block and maintained a faultless reputation when it comes to security. It has never been hacked or suffered from internal human errors resulting in the loss of customer funds (as far as we are aware).
Kraken has the budget to employ an army of people to continually monitor their system, improve it, and keep users safe. Several other top exchanges join Kraken on the never been hacked list.
Then you have security technology like that of Fireblocks, an award-winning Israeli company who have grown to become the most trusted wallet/security/settlement platform amongst institutions.
Breakthrough technology has enabled firms like Fireblocks to offer unparalleled security to their customers (exchanges, trading firms, Fintech businesses, etc.). Those customers pass the benefits on to their users, which, according to Fireblocks, includes insurance covering funds in storage and transit.
Interestingly, newer participants are leveraging Fireblocks more than the old dogs; it's hard to replace old tech when it's already up and running! Their customers include Revolut, Celsius and start-ups like Eve Exchange, a subscription-based exchange due to launch in the coming months.
In conclusion, while private wallets give users more control, many of the big crypto bags (institutional money) are secured by more modern technology. Wallets won´t change much and arguably don´t need to, but the way exchanges manage them continually improves, or at least it should.
Private wallets or exchanges? The is no winner in this game. It depends on the person, their practices, wants and needs.
We implore crypto holders to hone their security practices, stay alert, and make choices relevant to their needs & comfort levels.
Are you continually improving how well you manage your private wallets?
In answer to the title of this article, “Could hardware wallets be obsolete?” from a sheer technology standpoint, they probably are.
We hope this article helps people be more discerning, make better choices and doesn´t cause a barrage of criticism.
The views, opinions and positions expressed in this article are those of the author alone and do not necessarily represent those of https://www.cryptowisser.com/ or any company or individual affiliated with https://www.cryptowisser.com/. We do not guarantee the accuracy, completeness or validity of any statements made within this article. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author. Any liability with regards to infringement of intellectual property rights also remains with them.