Are cryptocurrency exchanges doing it wrong in 2019?

By BLOC.money on ALTCOIN MAGAZINE

Published in

The Capital

10 min readJan 24, 2019

Looking at this history of cryptocurrency exchanges, we can observe that nothing much changed since the creation of the 1st one.

2019 just started and we can already see famous exchange Cryptopia reporting a security breach on 14th january 2019. Media reports on the total value of stolen assets range from $3m to $13m.

The year of 2018 was the crypto theft at an all time high following the article on Forbes explaining how Hackers Stole $1B From Cryptocurrency Exchanges In 2018.

Hacks, Scam, Exit Scam, Freezing accounts, Stealing you name it, the cryptocurrency world is wild and we know it. What can we do about it ? How to protect ourself not to loose our crypto money.

What if we would re-think everything from 0 and provide a different way to exchange cryptocurrencies safely. That’s what we are trying to do with the PAYCHANGE project.

The first thing to understand is that you should NEVER leave your crypocurrency on an exchange wallet. You must use the exchange to make your transaction and withdraw your converted funds instantly. See the exchange like a shop, you come in, you choose what you need, you pay and get your goods and get out of the store. How many times do you leave money in your favorite store and comes back later to use it ? Never right. So the same works for cryptocurrency.

Most of the exchanges do not provide private keys of your deposited wallet for technical reasons. So if their website goes offline or somehow they decide to implement some crazy KYC features to steal all your private documents and decide not to give you anymore access to your wallet there is nothing you can do about it. Over 340 websites had a major security breach where informations has been extracted and there is a lot of chances that you can find your email here just try yourself and see if you have been pwned.

Let’s take some real example here. I have an account on Cryptopia containing coins and token worth about 0.1 BTC and for now since they announced the hack on 14th January, i can not login on their website so i have no access to my coins. I guess i did not learn the lesson and should not have left coins or token on their exchange. But that’s what happened and it’s my mistake.

Another real example with Kucoin where i have about 0.1 BTC worth of KCS shares and other tokens bought at very high price in december 2017. Everything was ok until they implement some strange KYC method and i personally don’t feel secure by uploading my personal documents on their website (or any others anyway). So my account is blocked and i guess i have lost again all my coins from this exchange.

Why cryptocurrency exchanges do not provide private keys ?

In most of the case you don’t have a private wallet on your favorite exchange. They have a bunch of hot wallets for each coin and a database that states how much coin you have. This allow to make trading almost instant without fees (for them) and move the funds easily using their local database and not making any transaction on the actual blockchain.

That’s why in most of the case you will see the deposit address often the same for all users (on cryptonote coins) but a unique and different Payement ID.

So they can’t provide they private key as you will have access to all the funds from this wallet. Most likely they will recommend a wallet to use, and then you can just send your coins there.

The responsibility of the exchange

If we look back at the last years of cryptocurrency and scam/hack exchange the list is pretty impressive …

So what happen when an exchange get hacked ? How do the users get their funds back ?

Since the exchange has to physically run the coin software to be able to interact with it and process transactions, the exchange should be the full and only responsible for running the proper services and maintenance related to each coins. Therefore a technical team should be aware of how each coins software works to implement into their exchange app. (this is in theory)

But in reality and in most of the case the end user is going to loose everything and not recover any funds back.

Reuters estimates that criminals have stolen over 980,000 Bitcoins from exchanges since 2011. Today, those stolen coins would be worth more than $3 billion — and that’s before you even consider all the other altcoins that have also been victim to hackers.

Right now the market has dropped from $800 billion to $120 billion but that’s a lot of money, and it’s easy to see why cryptocurrency is so attractive to hackers and cybercriminals.

So why so users are intended to leave coins on exchange wallets ?

Maybe because it is convenient to have all the coins in once place ? For sure it is easy to manage and you do not have to send the coins in and out to process exchanges transactions. But remember. Not your keys not your crypto.

Or because it’s too complicated to have all the software wallets installed on our computers or mobile device ? What about holding less crypto ? Do you really follow all the projects that you step in ? Holding more than 10 crypto looks risky. 5 seems to be the perfect number and the perfect combination to use the official wallets so you can own the private keys and follow the project.

Or maybe because the way how the cryptocurrency exchanges are working is wrong ? Is it time for changes ?

Time for changes

Let’s make a simple comparaison of what exists now and what we could create.

Exchanges today:

A lot of users are using exchanges to store their assets
User do not own private key of the exchange wallet
Exchange have to run a wallet for each coins they are trading this means they get exposed to security threat directly on the wallet or coin software
Repetitive fees (varies from 0.2 to 5%) for each exchange transactions
Some charge for deposit (a fix commission for each coin)
Most charge for withdrawal (a fix commission for each coin)
None use an hotline number
Most of the exchanges use candle stick and ‘stocks style’ charts impossible to understand by most of the common users
Crypto to Crypto exchanges require KYC (Know Your Customer) identification level way too high
Crypto to Fiat inverse are freezing multiple accounts
Most of the exchange use double authentification features as the highest security for login into your account
No assistance locally

With BLOC we are trying to build the ecosystem for the Cryptocurrency era.

We are working on our project called PAYCHANGE an innovative cryptocurrency platform to connected buyers and sellers. Users will be able to use, spend, exchange any type of cryptocurrency in the same way as they could with any other currency, but in a quicker, cheaper and more secure environment than it is currently possible in any traditional bank or other current cryptocurrency exchange.

Cryptocurrencies mass adoption is near.

Could PAYCHANGE be the trigger ?

It can definitely help. It’s not easy to understand how to buy and store securely cryptocurrencies online or in the real life for people that are not familiar with this digital universe. PAYCHANGE aims to provide services required to change the way we pay and get paid in our everyday life, by delivering one of the best Cryptocurrency online secure platform to use, buy, sell, and transfer cryptocurrencies.

What are the most innovative features of PAYCHANGE

There is many but one of the first is security. There will be different services that require different level of security. Once you will be able to register an account or use the seller area for exemple to list your business, this kind of actions will be done with a standard level of security using two factor authentification. To gain access to the trading area you may need to use an hardware device specially designed for BLOC and PAYCHANGE to increase security and offer what could be the most secure exchange ever created.

0% fees commission. No fees on trading, withdrawals, deposit or anything else. PAYCHANGE will work as a monthly or yearly subscribtion that can be paid in BLOC following the services you might need. Different package for different use.

A dedicated cryptonote coins exchange but not only. We will focus on include the cryptonote projects first simply because we understand and already work well with the cryptonote technology. Right now only TradeOgre offer an exchange service exclusively for cryptonote based coins and we think they need a competitor. BTC might be the only cryptocurrency pair for trading to start but more should follow with the time.

Fiat to crypo SWAP with small amounts. We would like for the launch of PAYCHANGE to offer a new way to buy and sell cryptocurrency with USD or EUR for a amount of maximum $50USD.

No KYC for crypto to crypto. Exchanging cryptocurrencies should not be limited to the color of your passeport or any other non sense limitations that appears every day. Trading crypto to crypto assets on PAYCHANGE will not require for you to upload your personal document and we will do everything possible to keep this feature as much as we can for the respect of user privacy. KYC might be needed only when exchanging fiat currencies to crypto and will follow the standard and legal procedure.

We will offer 2 kind of trading both easy to use and to understand

PAYCHANGE SWAP

We will use exactly the same concept as how blockchain works. PAYCHANGE will create blocks containing transaction of users that agreed to exchange the same assets. The PAYCHANGE SWAP will have different lifetime and different amount that can be set by the seller or the buyer. A PAYCHANGE swap can contain multiple senders and beneficiaries and all the transactions inside the swap will be made public.

Once everyone agree on the amount of the swap, the transaction is processed and everyone receive the funds to the provided wallet or bank account.

There is no hack possible here since we do not hold any wallet. PAYCHANGE connects a buyer and a seller agreed together to exchange assets.

Simplified trading

Let’s forget the candle stick chart and re-invent what cryptocurrency trading is all about. The simplified trading on PAYCHANGE is similar of what exist now on other cryptocurrency exchange except that we want to force the users to withdraw their coins once exchanged on the platform, providing links and tutorial for each of the supported coins on PAYCHANGE so the end user can understand how to use original wallets and withdraw to their wallet safely.

We will be running hot and cold wallets for each coins supported on the platform so this can offer a potential security breach. We think it is possible to run an exchange and empty the wallets every sometime. As soon as funds are exchanged they would be withdrawn in less than 24h or a preferred time.

Like this even if the wallets get hacked, they are empty or small amounts which limit the potential hack so the users can recover their funds.

Physical stores around the world

PAYCHANGE focuses on creating bridges between the real world and crypto-currencies. This ables individuals to buy and/or sell online or in real life while using cryptocurrencies in a simple and effective manner with an innovative approach. PAYCHANGE will have physical stores in different country’s where you can buy, sell cryptocurrencies hassle free but also get informations, attend courses, buy accessories such as hardware wallet and much more.

We plan to release PAYCHANGE before summer 2019 and we hope to be able to launch the 1st PAYCHANGE store at the end of 2019 as well.

PAYCHANGE a franchise model

Franchising provides benefits for both seller and buyer. For franchisors, the primary benefit is the ability to use other people’s money to expand the brand more rapidly than they could either on their own or through investors or lenders.

For franchisees, benefits include: a higher chance of success than in a sole proprietorship; shorter time to opening; initial training and ongoing support; assistance in finding an optimal site; the selling power of a known brand; lower costs through group purchasing; use of an established business model and much more.

In the same time franchisees would have their own independence but would have to follow some rules so that all the PAYCHANGE stores look alike and provide the same services.

Once the website is ready we will offer a package for anyone to open a PAYCHANGE store in their area. We have some serious advantages and unique features for selling and buying cryptocurrencies that can fit legally for each country where a PAYCHANGE store is created.

We can’t wait to launch PAYCHANGE. Meanwhile make sure you DO NOT LEAVE your crypto on exchange. Remember: NO PRIVATE KEY NOT YOUR CRYPTO.

Be safe.

BLOC is a fast, easy to use and private decentralized cryptocurrency. Send money spacewide, worldwide or locally, immediately and without costly intermediaries using the blockchain technology.

If this is your first time hearing about BLOC, we recommend starting by visiting the official BLOC.MONEY website and/or the BLOC.WIKI