How to keep your cryptocurrency safe after the FTX collapse

Sam Bankman-Fried’s fraud of misappropriating users’ funds has light-emitting diode investors to explore choices that may facilitate safeguarding their investments.

The autumn of the FTX crypto exchange forced several to rethink their overall approach to investments — ranging from self-custody to substantiative the on-chain existence of funds. This shift in approach was driven primarily by the dearth of trust crypto investors have within the entrepreneurs when being duped by FTX business executive and co-founder surface-to-air missile Bankman-Fried (SBF).

FTX crashed after SBF and his accomplices were caught on the Q.T. reinvesting users’ funds, ensuing in the position of a minimum of $1 billion of consumer funds. Efforts to regain capitalist trust saw competitive crypto exchanges proactively flaunting their proof-of-reserves to substantiate users’ funds’ existence. However, community members have since demanded that the exchanges show their liabilities to safeguard the reserves.

With SBF, the self-proclaimed “most generous billionaire,” committing fraud in broad daylight with no visible legal implications, investors should maintain a defensive stance once it involves protecting their investments. To safeguard assets from fraud, hacks and misappropriation, investors must take sure measures to stay in total management of their assets — usually thought of as best crypto investment practices.

Move your funds out of the crypto exchanges

Crypto exchanges are widely accustomed purchase and selling associated trade cryptocurrencies in exchange for a little fee. Whereas alternative methods, together with peer-to-peer and direct selling, are continually an option, higher exchange liquidity permits investors to match orders and guarantee no loss of funds throughout the transaction.

the matter arises once investors arrange to keep their funds in wallets provided and in hand by the exchanges. Unfortunately, this is often wherever most investors learn the lesson “not your keys, not your coins” the exhausting way. Cryptocurrencies being held on exchange-provided pocketbooks are ultimately in possession of the owner, that within the case of FTX users, was victimized by SBF and associates.

Evading this risk is as straightforward as moving the funds out of the exchange to a wallet with no shared non-public keys. non-public keys are secure encryptions that enable access to the funds stored in crypto wallets, which might be recovered employing a backup phrase just in case of misplacement.

Hardware wallet: The safest bet for storing cryptocurrencies

Hardware wallets provide total ownership over the non-public keys of a crypto pocketbook, therefore limiting the funds’ access solely to the owner of the hardware wallet. when procuring cryptocurrencies from the associate exchange, users should voluntarily transfer their assets to a hardware wallet.

Once the group action is completed, homeowners of the crypto exchange can now not be able to access the fund. As a result, investors choosing a hardware wallet will no longer risk losing funds to frauds or hacks happening over the exchanges

However, whereas hardware wallets augment the safety of funds, cryptocurrencies stay in danger of impermanent losses once a token’s worth goes down unrecoverably. Hardware pocketbook suppliers have witnessed a pointy increase in sales as investors slowly move far from storing their assets over exchanges.

Don’t trust, Verify

altogether the crypto crashes that happened this year — including 3AC, Terraform Labs, Celsius, Voyager and FTX — breaking of investors’ trust was a standard and evident theme. As a result, the locution of ‘Don’t Trust, Verify’ has finally resonated with each new and seasoned investors.

common crypto exchanges, including Bitfinex, Binance, OKX, Bybit, Huobi and, have taken proactive approaches to showcase their proof-of-reserves. The exchanges provided wallet data that enables investors to self-audit the existence of their funds among the exchange.

whereas proof-of-reserve shares a glimpse into the associate exchange’s reserves, it fails to produce the entire image of its finances as information regarding liabilities is usually not created publicly available. On Nov. 26, Kraken business executive Jesse Powell referred to as out Binance’s proof-of-reserve as “either mental object or intentional misrepresentation” as the information didn’t embrace negative balances.

However, Binance CEO Changpeng Zhao refuted Powell’s claims by stating that the exchange has no negative balances and can be verified in a coming audit.

The above three considerations are a good starting point for safeguarding crypto assets against bad actors. Some of the other popular methods to take away control from the crypto entrepreneurs are using decentralized exchanges (DEX), self-custody (non-custodial) wallets, and doing extensive research (DYOR) on seemingly investible projects.

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