At Switcheo Network, the security of our exchange and users’ funds has always been of utmost importance to us. Having been traders ourselves, we empathize with the haunting fear that traders have regarding the safety of their funds, regardless of whether they are stored in wallets, or on exchanges. This is why we value transparency and maintaining an open communication with our users especially with regards to such issues.
In light of the recent security compromises on Bancor and Bitpaction, we want to reassure our users that their funds are always secure when using Switcheo Exchange.
Security of Cryptocurrency Exchanges
To do that, we are addressing some questions about the security of decentralised exchanges that may have been raised during the Bancor incident, and also point out the differences between the Bancor exchange and Switcheo Exchange.
First of all, it is important to note that the funds that Bancor exchange lost was not from users’ holdings. Instead, the ether and various ERC-20 tokens lost belonged to the exchange and / or the various token owners / companies. These entities maintained a large pool of tokens under control of a single address. This large amount of tokens in the smart contract was required to provide a liquidity pool, as the Bancor exchange does not execute trades between users.
Instead, Bancor maintains token prices by enforcing that owners of listed tokens have to lock a pool of their own token as well as ethers within the smart contract, and then relies on the smart contract’s algorithm and user arbitrages to maintain each token’s trade price. Trades are therefore done against this pool of liquidity rather than peer-to-peer.
However, when the private keys of the control address itself was compromised, these liquidity tokens were unfortunately withdrawn and stolen.
On top of that, the Bancor token (BNT) could be frozen as the ERC-20 token contract Bancor used was not trustless. Bancor tokens can be minted, destroyed, frozen, and transferred from anyone’s address at any time by the Bancor control address.
On the other hand, it is Switcheo’s policy to ensure smart contracts are as simple as possible to reduce the chance of vulnerabilities and attack vectors (such as lost of control of keys, etc). The Switcheo Exchange smart contract is therefore purposefully simple, and the Switcheo control address does not hold any assets, and only has the capability to whitelist tokens, and freeze or unfreeze trading (for emergency purposes). When trading is frozen, users can still withdraw their funds.
Switcheo tokens (SWTH) also do not have any administrator capabilities like the Bancor token, and is fully trustless.
However, this also means that security of funds is primarily in our users’ hands. Frauds, scams, and phishing attacks have also become increasingly common due to the rising popularity/adoption of digital assets.
To better protect yourself from accessing sites that do not belong to Switcheo, please read the following article carefully: https://medium.com/@switcheo/securely-using-switcheo-eb4a08800367
Additionally, we strongly encourage all our users to do their due diligence before trading on any centralized exchange, or stick to trading on well-tested decentralised exchanges.
For users with additional feedback or concerns, please approach our friendly admins on our Telegram group or email us at firstname.lastname@example.org.
Building the True Peer-to-Peer Trading Platform
Distributed Ledger Technology also known as Blockchains were created for the purpose of building a decentralised and trustless economy. Fundamentally, this means that each participant of the blockchain is granted full control of their funds and is able to freely transfer their digital assets without having to trust a third party.
However, the infrastructure of centralised exchanges goes against such principles. The presence of a centralised authority together with withdrawals fees, leave users’ funds vulnerable to phishing attacks as their funds are left on the exchange.
Recognizing the dangers, Switcheo Exchange was built to embody the values of decentralisation even while trading, giving users full control of their funds and promoting privacy and security.
With zero withdrawal fees, users can withdraw their funds from Switcheo Exchange anytime after their trading activities. Trades on Switcheo Exchange are settled on the blockchain, and compromises of any off-chain services or exchange wallets cannot result in a loss of users’ funds. We also try our utmost best to ensure that the convenience and ease-of-use for our users is not unnecessarily sacrificed.
These are the quintessence of Switcheo and with that, we are committed in building a true multi-chain decentralised exchange for the new economy.
For more information on Switcheo, visit the following links:
News & Updates: https://t.me/switcheoANN