Changpeng Zhao, the CEO of Binance, one of the most popular exchanges in the market, has been criticized after recommending users to store their digital assets on exchanges. On January 15 he wrote a tweet in which he explains that users can use the most reputable and secure exchanges in the market rather than in USBs or cold storage wallets.
Store coins yourself. You fight hackers yourself, and guard from losing wallet yourself. Computer breaks, USBs gets lost.
Store on an exchange. Only use the most reputable, proven secure, exchanges.
Or move to DEX, disrupt ourselves. https://t.co/Ci4ux9I3VD
— CZ Binance (@cz_binance) January 15, 2019
Several crypto enthusiasts and investors started to comment on this issue. For example, the Twitter user @ArminVanBitcoin, a popular cryptocurrency enthusiast, said that ‘when Binance gets hacked’ Changpeng’s Tweet will become a meme.
Another Twitter user called @Satoshireaper asked Binance’s CEO why he does not promise insurance if he is so confident about the exchange. @WhalePanda has also commented on this issue saying that there is always a way an exchange could get compromised. Furthermore, the user @RNR_0 said that his comments are a challenge for hackers and that it gives motivation for them to try to attack Binance.
In another tweet, Changpeng Zhao answered that there are people misreading his tweet. He explained that he listed three options and he does not recommend any of them. According to him, each user can have different options depending on the skill, preference, fund allocation and more.
In the previous Tweet, he said to users to store coins by themselves, move to decentralized exchange (DEX) or just store them on an exchange.
The comments he gave about storing funds on an exchange come after a massive hack experienced by the cryptocurrency exchange Cryptopia. The platform is located in New-Zealand and it experienced losses of around $2.44 million worth of Ethereum (ETH) and $1.18 million worth of Centrality (CENNZ).
Exchanges have been hacked several times during the last few years. A year ago, the Japanese exchange Coincheck experienced an attack that resulted in the loss of around $500 million worth of NEM (XEM) tokens. After it, Japan decided to impose harder regulations on crypto exchanges.
Another hack that had deep consequences in the crypto market and that continues to affect the space is related to Mt Gox, another Japanese exchange. This hack resulted in the loss of around 70% of the total Bitcoin supply back in 2014.
During the first half of 2018, more than $731 million in virtual currencies was lost due to exchange hacks.
The best way for individuals and investors to store coins is using hardware wallets that are not connected to the internet. With them, it is possible for users to safely store their funds without having to be worried about attacks or hacks.
Exchanges are very vulnerable and are always targeted by hackers from different countries. Hackers are attracted by these centralized platforms because they hold several digital assets in just a few wallets, thus the rewards for the hackers are larger.