Andreas Antonopoulos Says QuadrigaCX Exemplifies Why Crypto Users Shouldn’t Trust Third Parties
Andreas Antonopoulos Says QuadrigaCX Shows Why Crypto Users Shouldn’t Trust Third Parties
Earlier this year, the QuadrigaCX cryptocurrency exchange announced it went bankrupt because the owner of the platform, who handled the cold storage wallets, did not leave the private keys of the exchange. This is one of the main risks associated with providing custody to third parties such as exchanges. Andreas Antonopoulos, the Bitcoin proponent and recognized author of mastering Bitcoin, said that people have to learn the “fundamental lesson” of not trusting third parties that handle virtual currencies.
Andreas Antonopoulos Warns About Cryptocurrency Risks
During a YouTube session of questions and answers, Andreas Antonopoulos talked about the experience that users lived with QuadrigaCX. The exchange was working properly until it ceased its operations. Users were requesting information about what happened and exchange executives informed the whole situation.
Bitcoin Q&A: The QuadrigaCX scandal and counterparty risk https://t.co/8hRodaKfyU
— Andreas ☮ 🌈 ⚛ ⚖ 🌐 📡 📖 📹 🔑 🛩 (@aantonop) March 28, 2019
The owner of the platform, Gerald Cotten, died of Crohn’s disease back in December 2018. Although there was no official information about it, in January 2019, executives explained that they did not have the necessary funds to remain liquid. What happened is that Cotte had stored the private keys of the exchange’s wallet himself and he did not leave any information about these private keys.
In general, crypto enthusiasts and experts such as Antonopoulos say “not your keys, not your crypto.” This is a general rule that applies to those users that believe that having virtual currencies in a crypto exchange is the best way of handling them. Clearly, there are some advantages of having the funds always ready to be exchanged, however, it is also very insecure. Exchanges and crypto platforms are usually hacked by attackers that can steal millions of dollars from users. If you are not the holder of your private keys, someone else will do it and you cannot be 100% sure that they are doing it properly. QuadrigaCX shows this issue.
Antonopoulos commented about using third-party services that deal with funds:
“And this applies to any domain of money, but it applies especially to cryptocurrencies because it is easier to steal or lose Bitcoin and other cryptocurrencies when you put it all in one place, and even more when the control is with just one person.”
Antonopoulos went on explaining that Bitcoin’s security is achieved through a decentralized network. It is not possible to hack Bitcoin unless the attacker has access to thousands of people in the network at the same time. Moreover, he mentioned that if the entire security process is centralized and just a single person holds the key for all virtual currencies stored by thousands of people, it can be susceptible as a single hack that could result in massive loss of funds.
The expert said that institutions such as exchanges and other platforms should be scrutinized and regulated in a similar way as banks. He then added that regulating decentralized asset keys was unnecessary.