The most popular New Zealand based Crypto exchange, Cryptopia, was hacked today. With that many of you are probably shaking your heads, but also saying that such an event is nothing new and almost to be expected. The fact is however, given certain facts, this is both true and not true at the same time.
If you have read Satoshi’s original Bitcoin white paper, then you know that the creation of cryptocurrencies was not really supposed to result in an explosion of third party services for trading them, though it did. The very nature of a cryptocurrency is to free the user from the traditional financial system by definition. At the same time however, because of how the blockchain and crypto communities have developed, every user has a choice with regards to this. He or she can always opt back in to the traditional financial system, especially now, when there appears to be little to no infrastructure to support claims that cryptocurrencies can be used in the same way as everyday money.
Another way of understanding this might be to say that they are not really pegged to everyday things like groceries. We are not yet able to walk into our local store and see the price of apples or milk in Bitcoin.
With this opting back in comes a heavy price in terms of security. If you truly own your crypto holdings, then you keep them on a hardware wallet like a Trezor, where no one else can reach them. If you use any sort of exchange to trade crypto, even Binance and Coinbase, then you always risk your account being hacked, resulting in your funds being lost forever.
If there is anything to be learned from the Cryptopia hack and the scores of others that came before it, it is this. Keep the majority of your holdings in a place where no one can reach them. Keep the rest for trading or spending. Make sure the former group outweighs the latter in terms of how much of a percentage of your portfolio it represents.
With this in mind, you will secure yourself as much as you can against any sort of hack, short of keeping everything you own off-line for good.
By: BGN Editorial Staff