Rising Crypto Thefts Have Weakened Investor Trust in Exchanges
Thefts in the cryptocurrency space have risen from $3 million back in 2013 to over $500 million in the present year. And, the biggest cryptocurrency theft so far has been a $500 million hack from the cryptocurrency exchange Coincheck. This has raised concerns amongst those who have parked their money with cryptocurrency exchanges. In fact, holders of cryptocurrency at these exchanges are now more concerned than ever about the security of their funds. However, the Coinbase exchange deserves some attention for its 99%+1% system to secure customer funds.
Coinbase Is About Compliance and Trust
California-based digital currency wallet and platform, Coinbase, allows customers to buy, sell, transfer, and store digital currency securely. The company remains focused on becoming the most trusted in the business. With 20 million users and $150 billion in trading volume, securing customer funds must take priority!
99% + 1% = 100% Security
Coinbase users must feel sure that their online wallets will not be hacked, believes Coinbase COO Asiff Hirji. To assure this feeling, Coinbase keeps 99% of customer funds in cold storage. Cold storage (here) means generating and storing the crypto private keys in an offline environment. Being away from the Internet, these private keys are immune to hacking instances. Popular forms of cold storage options used in the business include hardware wallets, paper wallets, desktop wallets, and USB drives.
The other 1%— the liquid funds that Coinbase uses to carry out trades — comes from the company’s reserves. Customer funds are, therefore, never directly exposed to market risk. Lloyd’s of London has privately insured this remaining 1%.
A Calculated Bet on the Future of the Financial System
Coinbase certainly isn’t one of those “fly-by-night” exchanges. The very future of the financial system is what they’re betting on. TThey have positioned themselves to fill the need of a fully licensed partner to the regulators, if and when they catch on to cryptocurrency. Coinbase undergoes routine audits and complies with all the policies that that may be applicable to a broker / dealer in publicly traded securities. These practices should enable the exchange to achieve its mission of becoming the most trusted in the industry.
The platform currently offers just 4 coins — Bitcoin, Bitcoin Cash, Ethereum, and Litecoin — as listed. Zavain Dar, a partner at VC firm Lux Capital, has even asserted that “getting listed on Coinbase is like being accepted into a top university.” Dar also said that “they essentially play the retail gatekeepers for what’s legitimate in crypto.”
Hirji and his company strongly continue to believe in compliance and trust even though it may not be a popular stance in the crypto community. “If we’re to shepherd this technology to a mainstream audience, we need to do it in a compliant way,” said the Coinbase COO.