Recently Bitcoin exchanges and even mining marketplaces have come under scrutiny due to Bitcoin’s being hacked with one recent example being NiceHash which is a Bitcoin mining marketplace that lost nearly $64,000,000 worth of Bitcoins in a hack over a week ago. Such concerns have fueled speculation into how safe Bitcoin exchanges really are. Despite measures in place that make it impossible to hack the currency itself, the exchanges themselves still remain vulnerable to exploitation. However there are numerous steps traders can take to protect themselves such as having a hardware wallet or an offline wallet, however exchanges still remain a popular place to store Bitcoin’s due to them being accessible anywhere and also making it very convenient when facilitating transactions. It is not just concerns about Bitcoin’s being hacked but also incompetence on the part of exchanges, such as Bittrex which has allegedly withheld user funds, shared private data and traders even used it to manipulate the markets through pumps and dumps.
Bittrex pumps and dumps
Traders have allegedly use Bittrex to pump and dump coins with one trader from Belgium going as far to brag that him and his group have made potentially hundreds of thousands of dollars through pumps and dumps, thus enabling him to buy a small house and even a Tesla vehicle. The practice is allegedly widespread which has lead to Bittrex issuing a statement that they would notify the relevant authorities and close accounts of anyone who engaged in such a practice. This maybe one reason why we maybe seeing Bitcoin’s price skyrocket a lot faster then most alts andeven at times when alt prices fall, Bitcoin’s prices surge dramatically due to investors sell their alt-coin holdings and switching to the Bitcoin. This maybe fueled by the fact that the majority of alt-coins have very little to no actual practical use and are potentially used by such groups to simply turn over a quick profit.
Sharing KYC details & private data
When trading Bitcoin’s on exchanges, users often have to go through what is called the “KYC process” which requires users to give their passport data and other sensitive information when setting up an account. This in turn can lead to users being compromised if the data falls into the wrong hands. This is exactly what happened when a Russian telegram channel posted sensitive information of a Bittrex user which included their passport details. Bittrex responded by stating user privacy is a top concern and their was an error in the system when user documents were merged together into a single support ticket, with Bittrex quickly removing such documents and correcting the error. But the user data is still available on a public telegram and many question why such a glitch occured in the first place.
Ever since Iran’s alleged nuclear program, it has been placed under sanctions which lead to numerous exchanges announcing that they would stop Iranian users from using their exchanges. However unlike other exchanges, Bittrex allegedly didn’t give any heads up to its Iranian users and simply withheld their funds with Iranian users complaining that there is no way for them to get their funds back. The users complained to Bittrex and have yet to receive a response. It’s still not clear whether the users still even have the coins in their accounts.
Bitcoin is still a new concept and a baby that is growing up fast in the World as it becomes more accepted and adopted within the financial infrastructure. So one cannot be surprised by the fact that their are criminal elements involved in trying to profit from the rise and success of the Bitcoin. However with every possible glitch, weakness or lapse in security is an opportunity for exchanges and traders to correct such a mistake and make themselves less and less vulnerable to being hacked or exploited by criminals.
The good news is the fact that users have numerous options when it comes to choosing exchanges to facilitate trades and can use a more reputable exchange. One such example would be Coinbase which has never been directly hacked and compromised till date. Furthermore users can also store their Bitcoins and cryptocurrencies in off-line wallets which are virtually un-hackable unless if thieves steal it but then again they maybe useless as off-line hardware wallets can be encrypted.