If we wanted to get some cryptocurrency, we will have to buy on an exchange. We can also get cryptocurrency from our friends or airdropped into our wallet. Exchange of cryptocurrency is one of the best way to get coins. The biggest error that most cryptocoin users do is that they leave behind the coins in the exchange wallet after getting their tokens which has to be transferred to their respective personal wallets.
Some reasons that makes the coins in exchange wallet risky are
Lack of ownership
The exchange account is only for the purpose of exchange and holds no amount or coins in it that can be owned by you. Exchange wallets are entirely different from that of personal wallet, exchange wallets are also called “hot wallet” used to sole purpose of trading. If in case the coins in the exchange wallet tend to get lost it cannot be claimed because we can’t hold any control over the coins in exchange wallet. When the coins are being on exchange wallet it simply denotes the coins belong to the exchange wallet. Some ICOs even advice their participants not to use exchange wallets to get tokens. ICOs doesn’t give private key to any of its participants.
Unregulated
Cryptocurrency has close cross-links between centralization and decentralization. The sole purpose is to promote decentralization with blockchain and cryptocurrency. The cryptocurrency exchanges are perhaps prevailing in centralized environment which in turn returns number of issues. The cryptocurrency exchange doesn’t have any control, there aren’t many rules. This can lead to many series of issues like assets can become frozen which recently happened in South Korea. Even if the exchange owners can give promising words that their participants, they can’t give guarantee. It is also because of the nature of the crypto coins that the exchange owners can hold no responsibility to return their money to the customers. The biggest drawback is that there is no regulatory body to streamline or insurance if in case something goes wrong.
Hacking Risk
The thing is regulations are not the only drawback but the safety for the assets in cryptocurrency holds no safety assurance and in addition to these threats of exchanges being hacked is high. Due to the fact that there is lag in regulations, exchange hacks are quite common. The chances of redeeming the lost coins are impossible. While blockchain prevails as centralized and makes it more secure, centralized exchanges are weak and make it vulnerable to hack.
It is always advisable not to hold any coins or tokens inside the exchange wallet. It is always better to transfer the obtained coins or tokens from the exchange wallet into our personal wallets. The exchange wallets give no assurance or guarantee with regard to the safety of the coins or tokens in the wallet. It is always better that we choose the wallet which will better suit us and download it from the app store and transfer the coins or tokens that are being exchanged through exchange wallet.