Welcome Back,
In today’s blog, we will talk about keeping your funds protected, and for that, we are going to discuss various options available in the market. Obviously, the two major options are centralized and decentralized exchanges, and apart from those, people also hold their investments in cold wallets.
Why This Topic Matters
The reason why I am sharing this is because of a recent hack that took place at an Indian exchange named CoinDCX. Approximately 44 million dollars were stolen from that centralized exchange, and as a result, people are suffering a lot. A few people I know personally have told me that they cannot access their funds. Everything has been paused, and they have not received any notice about when services will resume.
It Happened Before Too – WazirX in 2024
The same thing happened with WazirX back in 2024, as far as I remember. Since then, people have been unable to access their funds. A lot of my friends who used WazirX were upset because their money was stuck there. Obviously, the market went up last year, and they could not sell their tokens because their funds were frozen and inaccessible.
This is one of the risks associated with centralized exchanges. But do not worry as I am here to help you. I am going to share what you can do if you are using centralized exchanges, what the alternatives are, and my personal opinions and practices around this topic. So stay with me.
Choosing the Right Centralized Exchange
First of all, you have to make sure that you are selecting a decent centralized exchange when using your money to buy cryptocurrency. For me personally, I think there are a few reliable names like Binance, Coinbase, Bitget, and I personally use BingX.
These exchanges are fluent, fast, and the best part is that most of them have security funds. Even if the funds are compromised, they are ready to pay back to their users. This is something that is missing in Indian exchanges. As someone from India, I feel bad that Indian exchanges do not offer such protection.
On platforms like Binance or Coinbase, the reserve for security funds is visible to users. Anyone using the exchange can go and see that the reserve is being maintained and can be used in case of emergencies like a hack.
Should You Keep All Your Money on Exchanges?
Now, let us take one step further and talk about whether it is a good idea to keep all your money on centralized or decentralized exchanges. Because let us be honest, even decentralized exchanges are not foolproof against hacks. Few days back itself GMX was hacked and 40 million dollars was compromised and I even shared about it here.
Cold Wallets and Web3 Wallets
Here is the thing, in my opinion, your long term holdings deserve to be in cold storage wallets or your Web3 wallets like Metamask, Phantom Wallet, or any other you of your choice.
The funds you use for daily trading can be kept on centralized or decentralized exchanges, depending on your preference. But diversify, even those trading funds.
For example, if you are using 1000 dollars, consider dividing it across four exchanges, putting 250 dollars each. This way, even if one exchange gets hacked, your entire portfolio is not gone. The chances of all four exchanges getting hacked simultaneously are very low.
So again:
Keep long-term holdings in cold storage or Web3 wallets.
Use centralized or decentralized exchanges for trading based on comfort.
Diversify across multiple platforms to reduce risk.
My Personal Practice
I am one of those people who actively use decentralized exchanges and Web3 wallets. I have not yet had the privilege of using a cold storage wallet, though I plan to buy one after this bull run. It is definitely on my to-do list.
As of now, I have diversified my funds across more than ten different exchanges. I also use decentralized exchanges, and the one I use most is Hive Engine, since that is where most of my activity takes place.
The Common Excuse - Web3 Wallets Are Hard
If you are in the market, you might argue that a lot of people do not know how to use Web3 wallets, and that is why they prefer centralized exchanges.
To that I say, Why do you not know how to use a Web3 wallet? What are you even doing in this industry if you do not understand something so basic?
You have to educate yourself. You need to reach a point where you understand industry norms and can use the essential tools that keep your funds safe. This is not for my benefit or anyone else’s. It is for you.
So, if you want to protect yourself from hacks, follow what I said:
Diversify
Educate yourself
Use tools like Web3 wallets and cold storage
And remember it is your money, and only you are responsible for protecting it. No one else can do that for you.
A Personal Experience
That is all for today’s blog. I hope you have learned something valuable. If you have ever faced losses in cryptocurrency, do share your story in the comments. I would love to read them.
Before I say goodbye, let me share my personal story.
There was an exchange named Poloniex. It got hacked. I had a small amount of investment there, and to this day, I believe that money is still stuck. That was one of my early losses in the cryptocurrency world.
So go ahead, share your story too. Let us learn from each other.
Thank You and Happy trading everyone.
