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Bitcoin is often touted as one of the safest ways to conduct business online. That’s mostly true since the cryptocurrency is built on a decentralized network with public access to transaction records. But the same can’t be said for all the places you buy and sell Bitcoin, in fact, quite some cryptocurrency exchanges have fallen prey to hackers over the years.
You might remember the Japanese Bitcoin exchange Mt. Gox. It launched in 2010 and became the world’s biggest exchange the year after in 2011. That was also the year hackers made away with 2,609 BTC to the detriment of its users. Hackers have struck at different Bitcoin exchanges every year since then.
So where is it safe to buy and sell Bitcoin? Read on to find out.
What Makes a Cryptocurrency Exchange Vulnerable to Hacking?
Before we get into specific Bitcoin exchanges, it’s useful to look at why some exchanges are safe and others aren’t. Here are five of the most common reasons hackers are successful.
1. Data Leaks
Login credentials are key to accessing all the Bitcoin on an exchange. If an employee stores this information on a personal computer, there’s a good chance hacker can get their hands on it.
2. Insider Jobs
Hackers can also team up with someone who works at an exchange to gain access. That way, they’ll simply give the hackers login credentials in exchange for a share of the stolen Bitcoin.
Malware is malicious software disguised as something benign. If an employee accidentally installs that on an exchange computer, then hackers can easily gain access to the Bitcoin.
You probably recognize phishing from your own email inbox. Hackers don’t need to breach anything if they can simply convince an employee to hand over the Bitcoin with an email.
5. Wallet Security
Most exchanges have “hot wallets” where traders keep their Bitcoin. If these wallets aren’t properly protected, then hackers can use various methods to steal the Bitcoin stored in them.
Here Are the Safest Bitcoin Cryptocurrency Exchanges in 2020
Now that you know why some Bitcoin exchanges get hacked while others don’t, it’s time to look at your best bets. We’ve hand-picked the safest exchanges to use right here — check them out.
Coinbase is based in the US and is one of the world’s most well-known Bitcoin exchanges. They’ve never been hacked to this day, although hacking attempts have certainly been made.
Why it’s safe to use: Coinbase is very wary of hackers, including phishing. Read their blog post from 2019 where they explain how their security protocol detected and blocked an attack.
Kraken is another popular American Bitcoin exchange that hasn’t been hacked. Starting in 2011, they spent two years of rigorous beta testing before they even opened their doors to trading.
Why it’s safe to use: Kraken takes it slow and doesn’t add new cryptocurrency to their trading portfolio until they’re sure it’s safe. That means they sometimes lag behind — but they stay safe.
NordikCoin is a new European Bitcoin exchange started by a team of lawyers, auditors and technologists. The team’s vast experience means the exchange employs the latest security measures. The majority of funds are stored in cold storage multi-signature wallets, avoiding a single-point of failure and making it substantially more difficult for the exchange to be compromised. In addition, NordikCoin employs a vast array of anti-money laundering and Know-Your-Customer (KYC) procedures to ensure fast and safe client onboarding.
One example of this is NordikCoin’s innovative use of official electronic ID solutions like BankID, NemID and MobileID to login and register. This enables NordikCoin to perform obligatory KYC checks on new customers, slashing registration and verification time down to minutes, if not seconds.
Why it’s safe to use: NordikCoin is the world’s first cryptocurrency exchange that offers advanced ID verification and protects their users’ Bitcoin with multi-signature cold storage.
Nash is another new cryptocurrency exchange that employs new security measures to protect its users. Although they’ve mainly focused on Ethereum, they’ve recently adopted Bitcoin.
Why it’s safe to use: Nash eliminates the need for third-party storage of your Bitcoin. It’s a system that is similar to the Smart Contract technology you may recognize from Ethereum.
Gemini was started by the Winklevoss twins who are famous for winning a $65m lawsuit over Mark Zuckerberg. They also turned an $11m investment in Bitcoin into profits worth $1bn.
Why it’s safe to use: Gemini has never been hacked either and is lauded as one of the safest cryptocurrency exchanges — that’s why they secured the first settlement of Bitcoin futures.
Tips to Stay Safe When You Use Bitcoin Exchanges
You know how which Bitcoin exchanges haven’t been hacked and why it’s unlikely that they never will. That said, it’s still a good idea to stay safe — so here are some tips you can use.
1. Beware of Phishing
Bitcoin exchanges aren’t the only victims of phishing attempts. Make sure you look up the sender of any suspicious emails that sound too good to be true.
2. Protect Your Device
Whether you use a desktop computer, smartphone, or tablet, make sure you’ve installed the right anti-malware and virus protection. That way, you can reduce the risk of hacking attacks.
3. Spread Your Bitcoin Deposits
You’ll get a Bitcoin wallet when you create an account on an exchange. But don’t keep all your funds in one place. Spread them out so you don’t lose everything in case of an attack.
4. Use Two-Factor Authentication
Since login credentials can be leaked or stolen, it’s important that you authenticate your login details with an extra step. Use text messages or email two-factor authentication to stay safe.
5. Use Difficult Passwords
Don’t use your birthdate, your mother’s maiden name, or anything else that a hacker can easily figure out. Remember they have programs that can guess a million likely passwords in seconds.
Find a Safe Cryptocurrency Exchange Today
Hopefully, you now know what to look for so you can pick the safest Bitcoin exchanges to use in 2020.
Let’s quickly recap what we’ve covered.
Remember that cryptocurrency exchanges are vulnerable if they don’t take steps to avoid data leaks, insider jobs, malware, phishing, and wallet security braches.
You can stay safe by using Bitcoin exchanges like Coinbase, Kraken, NordikCoin, Nash, and Gemini in this upcoming year 2020.
But you should also protect yourself by being cautious with emails, protecting your device, keeping your Bitcoin in several places, and using two-factor authentication and difficult passwords.