By now pretty much the whole world is aware of the tragedy that hit Binance a few weeks ago and all the money that was stolen. But is this the end for Binance and cryptocurrencies or is there a lesson to be learned from all of this?
We would argue and say that despite the downside of this whole situation, there are actually several lessons that can be learned, especially about safety.
Confused by what we mean? Read on to find out more.
What Happened to Binance?
In case you've missed one of the biggest high-profile cryptocurrency hacks ever or if you want your memory refreshed will provide a quick summary of what happened.
On May 7, 2019, Binance - one of the world’s leading cryptocurrency exchanges - had a security breach that resulted in 7,000 Bitcoins valued at $40 million being stolen. The hack is the sixth biggest ever, and it
came as a shock to the industry since it targeted Binance which was widely considered to be one of the safest and most serious exchanges of its kind.
Directly after the hack, Binance and its CEO Changpeng Zhao (CZ), decided to halt all trading including withdrawals and deposits while they were looking into the situation. After a thorough investigation, trading was once again activated and CZ announced
that they would work on repaying the lost funds while also pledging to drastically improve the exchange’s safety measures.
So what can we learn from this? Let’s take a look.
Cryptocurrencies Are Safe But Not Safe Enough
Generally speaking, cryptocurrencies are safe to use, invest in, and trade with as long as you follow certain rules and take precautions. For example, as long as you store your funds where no one else can get to them, you will be safe.
The problem isn’t the cryptocurrencies themselves but rather the platforms we use. You see, unlike other markets, cryptocurrency trading is still relatively new which means there are no real regulations for the industry, and there are no guidelines for exchanges
in terms of safety.
In turn, this makes cryptocurrency exchanges rather vulnerable for hacks and data breaches which means that your funds are never completely safe.
Now, it’s probably only a question of time before this changes and the leading exchanges are constantly working on improving safety. But in the meantime, any trader that prioritizes safety should stick to other more protected markets.
Cryptocurrency Exchanges Aren’t Your Only Option
If you want to avoid losing your investments and cryptocurrencies you need to be smart.
Firstly, as we already mentioned, cryptocurrency exchanges aren’t very safe, and you should never keep all of your funds on your trading account. Instead, we suggest you keep your cryptocurrencies on cold storage such as paper or the
Ledger Nano S hardware wallet.
Secondly, there are other exchanges and platforms that are far safer than cryptocurrency exchanges. For example, most CFD and
industry leading forex brokers offer cryptocurrency derivatives, and thanks to strict regulations within the industry, these brokers never get hacked or breached. Also, these brokers
have started rolling out actual cryptocurrency trading, meaning you don’t have to only trade derivatives anymore.
Third and finally, there is a plethora of other markets that you can trade on that are considerably safer than cryptocurrencies. Stocks, forex, commodities, and bonds are examples of highly popular and safe options for traders.
Instead of dwelling over how bad the Binance hack was and how unsafe some people feel when trading cryptocurrencies, we encourage you to learn a lesson from this.
In the end, it’s your responsibility to ensure that your investments are safe, and by picking the right exchange, instrument, and broker, you will be safe. And let’s not forget that these hacks are what pushes exchanges to improve their safety so even though
it’s horrible when it happens, it will actually benefit us all in the long run.
Lastly, 40 million dollars might sound like a lot of money, but for a major exchange like Binance it’s chump change, and they are already working on paying it back and restoring their own funds.
External | what does this mean?