When people get into crypto, they ask, which crypto exchanges can I buy crypto from? And the second question they ask is, where do I store my crypto? That second question should actually be first because unless you control your private keys, it doesn’t matter where you buy your coins or tokens. You could put all of your money in an exchange wallet, or even just one token — but if you lose access to your private keys (or worse, hackers hack the crypto exchange), then that cryptocurrency is gone forever.

<img class="aligncenter" src="https://time.com/nextadvisor/wp-content/uploads/2021/06/Crypto-exchanges-what-you-should-know-and-how-to-compare-them-if-youre-going-to-invest.jpg" alt="Crypto Exchanges" width="560" height="369" />
<h2>Keeping Your Crypto on A Centralized Exchange Can Lead to A Hack</h2>
Several risks come with keeping your crypto on a centralized exchange. First, hackers have been targeting these exchanges for several years. They are much easier to hack because users' assets are kept on 'hot wallets' connected to the internet. Hackers can access this information easily and steal large amounts of money. This made the <a href="https://coincheck.com/">Coincheck</a> hack and the Poly Network incident so devastating.

A common misconception is that <a href="https://www.fdic.gov/">FDIC</a> insurance protects you when holding cryptocurrency. Although some exchanges offer FDIC insurance, this only covers the first $250,000 of your crypto. Still, digital currency security experts advise against keeping your crypto on an exchange since the crypto exchanges hold it on an IOU basis and have no way to recover the money. 

Cryptocurrency is a volatile commodity, and hackers have learned to exploit this by targeting crypto exchanges. In the last year alone, hackers have stolen billions of dollars worth of digital currency from crypto exchanges. Twenty-five percent of the money lost in the crypto exchanges was worth not less than $10,000,000 per heist. And that's only a small fraction of the total digital currency supply. Regardless of the size of the losses, these attacks are a major concern for the crypto industry and investors.
<h2>Do Crypto Exchanges Have Security Measures?</h2>
While crypto exchanges provide a certain degree of security, they don't have full-time cybersecurity staff. As a result, hackers may not realize they've become a target, and developers may be frantically working to make the code work. A simple mistake can lead to millions of dollars lost in seconds in this situation.

While exchanges reduce the number of hacked accounts, keeping large amounts of crypto on an exchange is risky. Some crypto exchanges are even closing down due to these hacks. Keeping your crypto on an exchange can lead to a hack, and the more security measures you take, the less risk you'll face. In the meantime, you'll be able to use cold storage solutions like multi-sig wallets to protect your assets.
<h2>Keeping Your Crypto On A Hardware Wallet Is The Safest Option</h2>
One of the best ways to protect your digital currency is to use a hardware wallet. These wallets are separate from your computer and store your private keys in a hard-to-hack device. For example, the <a href="https://www.cryptoknowmics.com/news/ledger-app-adds-support-for-cardano-smart-contracts">Ledger Nano S</a> is a popular hardware wallet that encrypts your private keys. While there are many advantages to using a hardware wallet, you should choose a secure device if you value your security.

The downside of a hardware wallet is that it can be difficult to use and set up. Some hardware wallets are unreliable or difficult to install. In addition, hardware wallets require that you adhere to certain best practices. The other option is to use a custodial wallet, which is less secure than a hardware wallet. However, custodial wallets offer convenience and do not require as much responsibility.

While some people believe that storing your cryptocurrency on a cloud wallet is more secure, many people are still unsure how secure it is. In addition to cloud wallets, a hardware wallet allows you to send and receive crypto from another address without the need for Internet access. While the price of a hardware wallet can be high, it is a worthwhile investment if you're looking to store a large amount of cryptocurrency.
<h2>Hardware Wallets: Cold Wallets vs. Hot Wallets</h2>
While <a href="https://www.investopedia.com/terms/h/hot-wallet.asp">hot wallets</a> are convenient, they are not effective against digital attacks. Hackers can take advantage of vulnerabilities in the software or use malware to break into the system. Also, hot wallets hosted by crypto exchanges are a more attractive target for crypto thieves. On the other hand, using a hardware wallet is the safest option. The most secure option is to use a cold wallet, which is the best choice for those holding crypto for a long time.

A hardware wallet is also safer than an online service. With transparent security and audits by expert security researchers and verified track records, the <a href="https://www.cryptoknowmics.com/news/hardware-wallet-trezor-alerts-users-on-an-ongoing-phishing-attack">Trezor Wallet</a> ensures your assets are safe. Furthermore, it offers a convenient interface and offline backup for peace of mind. Finally, you have control over your funds and can access them whenever you want. If you're concerned about Bluetooth security, you can opt for the Trezor Model T.

In addition to being more secure, a hardware wallet also allows you to make payments online. It may support multiple currencies, and some of them have web interfaces, making it easier to conduct transactions online. Many people consider hardware wallets to be the safest option for storing crypto assets. However, they are not free of charge. Nevertheless, they are thought to be the safest and most secure wallet option.
<h2>Final thoughts</h2>
Hacking crypto exchange accounts is a frightening reality. One example is the Binance hack, which wiped out $40 million worth of funds. A single mistake in the exchange's custody modeled to this massive heist and was the catalyst for the hack. While the crypto exchanges can't control customer funds, they should at least pour some of their profits into a strong security apparatus. Companies like <a href="https://www.cryptoknowmics.com/news/binance-temporarily-suspends-withdrawals-on-solana-sol-network">Binance</a>, for example, put away 10% of their customers' funds if they are hacked. However, the issue is that these measures are not sufficient to protect the crypto market.

The recent <a href="https://thespinoff.co.nz/business/28-05-2019/how-new-zealand-company-cryptopia-lost-over-20-million-from-a-hack">Cryptopia hack</a> in 2021 is a stark reminder of why protecting your funds and wallets is important. Although cryptocurrencies and their exchanges are not without their risks, exchanges have a long history of hacking. For example, the largest one-time hack on Cryptopia cost nearly $16 million and almost 17,000 ethers. So while the hack was relatively small, it still represents a major anchor on the market.

Crypto Exchanges: Is Keeping Your Crypto on them a Bad Idea?

If you're one of the many cryptocurrency users that keeps your cryptocurrencies on crypto exchanges, you may wonder how to stay safe. Is it a bad idea?

Oluwademilade Afolabi is a freelance writer and editor passionate about blockchain technology and the health industry. He is a 6th year medical student, and has worked with various companies and blogs since the blockchain revolution began.

Crypto Exchanges: Is Keeping Your Crypto on them a Bad Idea?

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