Today, there are a great many people foretell the death of cryptoeconomics, and great many are talking about its great future. Investing in cryptocurrency is a story of big victories for some and it is bankruptcies for others. Cryptocurrency exchange is a place where everyone can start their own success story at any time. Forewarned is forearmed. In this article we will try to analyze the risks that an investor may face when working with crypto platforms.
1. The human factor
A bright example is the recent history of the Quadriga exchange. The founder and owner of the company, who died in February 2019, had crypto-keys from all accounts. About 140 million US dollars were blocked. It is unlikely that this story will end well, because getting full access to cryptocodes is an extremely difficult task.
According to the analytical company Autonomus Research, since 2011, more than 50 successful hacker attacks on the exchanges and ICO sites, in which 1.6 billion US dollars were stolen. At the same time, half of this amount was stolen from 5 exchanges in 2018. Vulnerabilities of the Japanese Coincheck also conduced to the company’s clients, most of whom kept cryptocurrencies on hot wallets. These wallets are available online, and therefore more vulnerable to hackers.
There are cases where individuals have lost their crypto keys from their wallets, and there have also been cases of theft of crypto keys using social engineering. Unlike traditional exchanges, where ownership, for example, per share can be confirmed on the basis of the registry, in the case of cryptocurrency, doing the same is very difficult.
3. Sham project and phishing
In recent years, this trend is gaining momentum. So, in 2018, the WEX exchange had several clones in similar domain zones, which led to the theft of depositors’ money. Simple inattention can cost you dearly.
At the beginning of 2019, the South Korean cryptobirth Coinnest really distributed to its users 5.3 million US dollars in cryptocurrency. The reason for such action was a software failure.
5. Presence of vulnerability before the law.
The identity of the owner is directly related to the security of the project for investors. The semi-criminal nature of transactions and debts led in 2017 to the arrest of the founder of the largest cryptobirth BTC, as a result, to the suspension of its activities. The lack of full-fledged regulation of cryptoeconomics in the modern world does not protect cryptocurrency owners from possible losses.
The increase in the number of hacker attacks means that the industry, despite all the negative forecasts, is developing. On the other hand, cryptocurrency companies do not pay enough attention to new challenges and do not invest enough in the development of security projects. The volume of daily trading and the period of existence of cryptocurrency exchange in the market can no longer fully guarantee the user no risk. Our advice is to keep your cryptocurrency on “cold” wallets, namely, external carriers without access to them by way of Internet channels. We wish you large profits and good investments!