By now you’ve probably heard about the really sad and unfortunate situation in Canada, with the largest crypto exchange there, Quadriga. They have lost access to millions of dollars worth of bitcoin and other cryptocurrencies due to the sudden death of the exchange’s chief executive and co-founder, Gerald Cotten. Turns out he had the passwords and recovery keys to the exchange’s computers on his laptop, and his sudden death has now left almost $200 million in a cold storage wallet that no one can get into, not even the owners of the currencies stored there. For more information on this situation, check out this article from Forbes.
While there may be more to this story, as Quadriga has had a long legal battle with one of its banking partners last year, and there are even people questioning whether Cotton is really dead, there is a larger lesson here. Storing your coins on a crypto exchange is not a good idea. This is just one scenario of what can go wrong.
Bitcoin Exchanges are Vulnerable to Hacking
The first and possibly most well-known hack happened to Mt. Gox, based in Tokyo, Japan in 2011 and again in 2014. Then Florida-based Cryptsy was hacked in 2014; UK-based Mintpal was hacked twice in 2014 and its own CEO allegedly stole 3,894 bitcoin; Luxembourg-based Bitstamp was hacked in 2015; as was Chinese crypto exchange BTER. In 2016, Hong Kong-based BitFinex was hacked; NiceHash in Slovenia was hacked in 2017; and in 2018 Tokyo-based Coincheck, Italian exchange Bitgrail, Indian exchange CoinSecure, and South Korea-based Coinrail were all hacked. You get the picture.
Bitcoinzar gives this advice, “Bitcoin exchanges should be used as intended, so in other words, you deposit, exchange, and withdraw once you are done. Only leave the funds on the exchange that you are using to trade. Any bitcoin that you are not trading with, you should withdraw to your own secure wallet, one that YOU control the private keys for.”
In addition to people dying suddenly, and hackers gaining access, bitcoin exchanges have gone suddenly bankrupt, have been victimized by internal corruption, and have just been problematic for users.
The Safest Place to Store Your Bitcoin
Logically, the best place to store your bitcoin is on a wallet that only you have the private keys for. When you secure your bitcoin yourself, you aren’t subject to any of the catastrophes that can befall a crypto exchange. And this is totally in keeping with the philosophy behind bitcoin in the first place: it’s a decentralized digital currency that’s not controlled by any bank or financial institution.
A bitcoin hardware wallet is the most secure place for you to store bitcoin that you’re not planning to trade. If your plans include spending or trading some of your bitcoin, you should store that on a private mobile wallet. Remember, your mobile wallet is only as secure as the device you store it on. It’s essential to set up 2-factor authentication for your account and for your phone in the event your phone is lost, stolen, or hacked.
Safely Use the Coinsource Wallet App to Store Bitcoin
Only YOU have access to your funds and transaction data using the Coinsource wallet app. This premium wallet has the highest level of security and live support, including 2-factor authentication. Here are some of the outstanding features of this app:
• Simple account creation using just a login & password
(no printing of PDFs, writing down pass phrases, or adding encryption settings)
• Automatic encrypted wallet backup to redundant peer-to-peer cloud servers
• One-Touch 2-Factor Authentication for the easiest-to-secure wallet in the world
• Quickly switch accounts with username drop down on login screens
• Multi-device synchronization across all mobile devices
• Zero-knowledge & zero-access to user funds, keys, or transaction data by Coinsource or 3rd parties
• Pay using Bluetooth (BLE) without needing QR codes
• Hierarchical Deterministic wallets with changing addresses per transaction
• Multiple wallets per account with simple user defined wallet names (i.e. “Vacation Fund”)
• Multiple fiat currency support. Assign a fiat currency per wallet
• Search transactions by payee, category, or notes
• Built in calculator for easy conversions
• Merchant Mode enabling easy and fluid UI behind the counter
• Partial payment detection creates a new QR code payment request with remaining balance
• Daily spending limits (require password to spend above limit)
• PIN-requiring spending limits
• Two-tap quick UI to transfer funds between wallets
• Import funds from WIF or Casascius private keys
• Decentralized server architecture. Wallets fork even if Coinsource servers are down
• Integration with the Coinsource Business directory to auto-complete business information for transactions including business logo/photo
• Integrated buy/sell for US and Canada residents
• Integration with address book to auto-complete payee name and photo
• BIP 70 Payment Protocol Support