Safeguarding Customers on CEXs: What’s Being Done and What Can Be Done [An Analysis]

Cold Wallets

To simply put, cold wallets are wallets that are offline. In most cases, they take the form of hardware wallets. The most popular brands are Trezor and Ledger.

Insurance

Aside from keeping users funds in cold wallets, some CEXs have started ensuring funds of their customers. Some of them self-insure like Binance’s much-touted SAFU program which allocates 10% of all trading fees in the platform only to be used when user funds are in trouble.

Decentralized Trading

Throughout cryptocurrency’s first decade of existence, centralized exchanges have been the weakest link in terms of security as they serve in many instances as the main conduits of attacks and risks.

Risks on Centralized Exchanges

Centralized Exchanges will not go away anytime time soon, they do play a major part in the whole cryptocurrency ecosystem. Moreover, they have also been looking for ways how to secure their customer’s funds while navigating the regulatory environment where they operate.

Decentralized Exchanges

This is only possible in a decentralized exchange setting where digital currencies never leave the custody of the customer. In this way, traders need not trust the exchange operator and are ensured that the transaction will push through, be confirmed and finalized guaranteed by the blockchain itself.

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