A staggering $1.7 billion worth of cryptocurrency was lost to hacks and scams between 2011 and 2018. One. Point. Seven. Billion. Dollars. If that doesn’t scare you, wait until you hear this next stat: 40% of all crypto thefts took place in the first three months of this year. (Source: Crypto Aware)
We are living in the crypto Wild West and not enough people are talking about how we can establish some kind of order and ensure that people don’t fall victim to the hackers and scammers who, to this point, have quite literally been given a free ride.
There is no easy solution, but there are measures that can be taken, one of which is cold wallet storage, but we’ll get to that shortly. First, we need to face some harsh realities.
The era of apathy
It’s astounding that consumers have to put up with this situation, with so few examples of anyone being held accountable when things go wrong. We’ve become immune to news of exit scams, security breaches and catastrophic levels of incompetence. Multiple times we’ve seen exchanges breached for tens and hundreds of millions of dollars.
As crypto continues to grow and we move towards a token economy, we cannot as a community continue to accept this wilful neglect shown by so many in this sector. Crypto is the future, of that there can be no doubt, but we must get serious about security and the buck falls upon those custodians of cryptocurrency transactions, the exchanges.
We don’t want to see another exchange hack, particularly as the sector grows and new traders come into the crypto economy. Crypto exchanges should do all they can to protect your assets — and they should be able to show you exactly what they have been doing to keep your funds secure.
We’re all enticed by the glimmering lights of contests, giveaways and freebies, but what’s ultimately important is that you are trading on an exchange you can trust. Would you rather buy a padlock that is strong, sturdy and secure, or one that looks pretty and comes with a free pen?
Security in our nature
We’re extremely proud of our track record. Liquid was built from the ground up with security at the front and centre of every decision we have made. One of the decisions we have made is to use 100% cold wallet storage for customer assets. This means all funds are kept offline. We’re one of the few crypto exchanges, if not the only one, to take this approach.
All withdrawals are processed manually and require multiple signoffs from senior members of staff. This is the only approach we are comfortable with and it’s one of the security features that the Japanese Financial Services Agency looked at when awarding us our license.
The feedback we have had from our community tends to be divided between gratitude that funds are safe and frustration that instant access to assets is not possible. We have heard this feedback loud and clear and have mulled over the idea of introducing some kind of warm wallet, which could give quicker access to funds. After weighing up the pros and cons, however, we decided that anything other than a pure cold wallet presents too much risk — and even a small risk is too great for us.
Hackers and scammers aren’t going away and they will target any weaknesses they see. At Liquid, we refuse to give these villains any opportunity to pilfer what rightfully belongs to our customers. Other exchanges don’t take this approach, but for us it’s essential.
We appreciate that there are times when traders want to quickly withdraw their coins and tokens. To address this, we have committed to making our withdrawal processes much more efficient. Currently we only process withdrawals once a day and on business days. Sometimes this is frustrating and we wholeheartedly acknowledge the shortfalls of our approach and will strive to implement a system that works for everyone.
We don’t want to end up the next victim to hackers as our customers will be the ones most affected. It’s time to do away with the notion that crypto has to be like the Wild West. As a community we should have said enough was enough after the first million dollars was stolen, never mind the next $1.7 billion.
Regulation is important, exchanges must adopt best practices and negligence can never be tolerated.
We welcome discussions on this topic and would love to hear some perspectives from our community on how we can reduce the risks for traders now and in the future.
