There have been many cases over the years where exchanges like Mt. Gox have either run away with their customers' coins, or gotten hacked and had everything stolen. Unlike storing your money in a bank in the US, the coins you hold on an exchange are not federally insured. If a malicious exchange or a hacker takes your coins and disappears without a trace - they are gone. There is nothing you can do to get them back.
I personally use exchanges, and I do think having some coins on them for a short amount of time is relatively safe. I do not recommend leaving your coins on them for extended periods of time though, because you are exposing yourself to a greater risk by having them on the exchange over a prolonged period of time. Even a very short amount of time does still has risk.
A large exchange hack could be a crushing blow to the bull market that we have seen over the past few months. I really hope that we do not see anything like this happen. If we do though - I want everyone in the Steem community to be safe.
Here are some tips:
- If you are not planning on trading, keep your coins in your own personal wallet rather than on an exchange.
- For coins like bitcoin which have offline wallets, consider using an offline wallet for long-term storage.
- If you are planning to use an exchange, only transfer your coins in long enough to make your trades. Once you are done, export them back to an external wallet.
- If you are planning to leave coins in the exchange to have open orders on the books, keep in mind the risk of leaving your coins on the exchange.
- Store your security keys somewhere safe, and make sure they are backed up in the event of a hard drive crash or fire.
- For your STEEM wallet, if you are planning to hold onto your coins for a while, consider powering them up or putting them in your savings account in your wallet, since it would take longer for someone to take your coins in case your account were to be hacked.
Also, there are two alternatives that are much safer than traditional exchanges:
- BitShares - A "decentralized" exchange, where all of your coins are held in a local wallet, rather than on an exchange's servers. You get all the trading features of a 'regular' exchange, minus the risk.
- BlockTrades - Allows you to trade coins your without sending them to an exchange. You pick which two coins you want to trade, and then it will provide you an estimate for the current exchange rate. You send the coins you want to sell to them, and they send the coins you want to buy to the wallet address you provide them with.
If anyone else has any security tips, please share them in the comments below!
The intention of this article is not to scare anyone, but I do want everyone to be safe with their hard-earned STEEM/SBD!