Cryptocurrency exchanges

How does a Cryptocurrency exchange work and is it safe?

How does a Cryptocurrency exchange work and is it safe?

A cryptocurrency is a form of digital money that has taken the world by storm. In the early days, it was hard to get cryptocurrency from miners. However, things have changed for the better, and the general public can also buy cryptocurrency from exchanges located worldwide.

Unlike traditional currency, crypto coins do not exist in physical form. Hence, many people are confused about the way cryptocurrency is sold and bought in exchange. To quell your doubts, here is some information on the way cryptocurrency exchanges like FTX Exchange work.

Cryptocurrency Exchange is a digital platform to trade crypto assets. Contrary to the belief, crypto coins are only one of the digital products traded at such exchanges.

In reality, the cryptocurrency exchange functions more like a stock market. The only difference is the way the traders make a profit.

There is no official global price for cryptocurrencies, and the exchange does not set its price. Several factors affect the prices of crypto assets, which include the actions of buyer and seller. The prices are calculated based on trade volume and the supply and demand of cryptocurrency from users. In other words, the higher the exchange, the more market-relevant prices you will get for your crypto assets.

A cryptocurrency exchange has several revenue streams. The most important ones are market making, listing fees, commissions, and fund collection for ICOs, STOs, and IEOs.

Every person using the platform to buy or sell crypto assets on the exchange must pay a certain fee to the exchange, also known as commission. The exchange charges the trading fee for facilitating trade between buyer and seller. A leading platform like FTX exchange charges low trading fees (0.5%) as low fees bring the high trading volume.

New cryptocurrency trading platforms charge listing fees as they have low trading values and the earnings are not enough to sustain the platform. You can find exchanges levying fees for coin and token listings.

At some exchanges, you get a better price for your crypto assets. In market making, the exchange swaps the trade with another exchange that cancels the previous trade. The platform provides absolute liquidity to a specific cryptocurrency by asking the investors to submit both bids. The next step involves limiting orders on the exchange.

The traders collect the bid-ask spread over multiple trades in the form of profit, and the exchange gets revenue in the form of commissions.

Crypto platforms allow companies to organize a token sale on the platform. In this model, the exchange acts as a storehouse where people can buy chips before they are listed. The exchange collects fees from the fundraising company.

The cryptocurrency exchange earns a commission on total proceeds. If the final amount is large, it could mean a big payout to exchanges.

According to experts, 99% of crypto transactions are done on centralized exchanges. In centralized cryptocurrency exchanges, buyers and sellers trust their crypto assets to a third party. Transactors use the network of their peers and the exchange platform to complete the transaction safely.

The two keys are essential to complete the transactions. If the user forgets the key, he/she may lose access to the crypto asset. In a centralized exchange model, the cryptocurrency stores the keys but stores 90% of digital assets in cold storage (offline), making it difficult for hackers to rob the crypto assets.

In decentralized crypto exchanges, the platform does not store the keys of crypto assets, making all hackers’ attempts futile. Decentralized exchanges allow peer-to-peer transactions and settle the transactions between two individuals.

Cryptocurrency exchanges employ various methods to keep digital assets safe. Besides this, they also employ additional layers of security to keep digital wallets safe from hackers.

Multi-factor authentication – It is a well-known fact that passwords alone do not guarantee foolproof security. Hence, platforms like FTX exchange use multi-factor authentication for digital wallet access. In multi-factor authentication, the users are required to go through two-step validation. First, the user must enter the right password and then enter the code sent to the user’s registered email or phone.

After entering the code, the user can access the crypto assets in digital wallets. The cryptocurrency exchange also sends an email to the registered Email ID for every successful and unsuccessful login attempt.

To sum up, cryptocurrency exchanges are similar to stock exchanges in many ways. They have the best security technologies to safeguard the assets and efficiently use the interface to trade crypto assets on the platform.


Korean crypto exchanges prepare to address server glitches, fraud •

Korean crypto exchanges prepare to address server glitches, fraud •

Originally reported by-Cryptopolitan

TL;DR Breakdown:

  • Crypto exchanges in Korean are beefing up their system against certain security issues.
  • They will enforce AML measures starting March.

Crypto exchanges in South Korea saw a massive increase in traffic, following the rising interest in digital currencies in the jurisdiction. However, the growing interest in digital currencies among Koreans is causing security concerns for most of the cryptocurrency exchanges operating in the region. They have to tighten up their systems and security measures to address this issue, including crypto-related frauds.

Since Bitcoin and other cryptocurrencies began rising in the last quarter of 2020, most Korean crypto exchanges began seeing significant increases in traffic. The growing price of these cryptocurrencies was apparently attracting more investors to trade their cryptocurrencies. Simultaneously, many exchanges faced server glitches that took their services offline for hours. For instance, the Bithumb exchange reportedly went down on February 1 for more than two hours.

Upbit and Coinone also suffered a downtime earlier before February. According to the Korea Herald, these crypto exchanges are beefing up their system to accommodate the users while also adding and adopting new regulations to combat frauds and comply with regulators. An executive at Upbit exchange commented:

“We are adopting various methods to prevent investors from being harmed by financial fraud by operating a 24-hour deposit and withdrawal monitoring system and disclosing financial fraud cases. At the same time, new legislation to be imposed on cryptocurrencies are expected to reinforce the security of exchanges.”

Some Korean exchanges had to repay users affected by a phishing scam, and so, they are adopting alert systems to combat these frauds. Upbit admitted paying $1.1 million last year to 60 victims affected by phishing scams. Starting March, these exchanges will enforce anti-money-laundering (AML) measures and KYCs as required by the revised Specific Financial Transactions Act.


Market share of top crypto exchanges passes $1T: CryptoCompare report

Market share of top crypto exchanges passes $1T: CryptoCompare report

Out of the 160 cryptocurrency exchanges analyzed in a recent report, half control roughly 85% of the total market share.

According to a CryptoCompare Research report published today, exchanges that the analytics firm rated as “top tier” gained 13% of the market share from October to January. This put the market share of these 84 exchanges at roughly 74% with more than $1 trillion in assets.

However, CryptoCompare said this percentage likely rose to 85% for January. Given that the total market capitalization of all cryptocurrencies is $1.47 trillion at the time of publication, the market share of these exchanges may now be more than $1.2 trillion.

The report attributed the increase in market share to retail and professional crypto traders turning to exchanges with seemingly lower risk as the price of Bitcoin (BTC) surged past $20,000 in late December and $30,000 in January. 

However, one of the more significant reasons for the increased market share may be CryptoCompare rating 16 more exchanges as “top tier” than in October — a designation meant to measure an exchange’s level of risk rather than their superiority. The firm noted that many exchanges are now complying with “toughened” KYC and AML requirements. Many are also providing increased transparency, and improving their overall operational status. 

According to CryptoCompare’s results, the firm said that 44% of the 160 exchanges analyzed offered the ability to “query full historical trade data via a public API endpoint,” compared to 37% in July. In addition, the percentage of exchanges rated as having “poor or inadequate” KYC systems according to CipherTrace had fallen from 44% in July to 33% in January.

The report specifically mentions Coinbase, Gemini, Bitstamp, Kraken, itBit and Luno as the “lowest risk exchanges. Others such as Binance, FTX, OKCoin, Huobi Global, and Bitfinex are listed in the next “lower tier” category.


Exmo crypto exchange suffers second attack in two months

Exmo crypto exchange suffers second attack in two months

Exmo crypto exchange suffers second attack in two months

London-based cryptocurrency exchange Exmo suffered a distributed denial-of-service attack on Monday, causing the platform’s servers to become unavailable.

In a tweet on Monday, Exmo reported that hackers had targeted the exchange with $75 million in trading volume in a distributed denial-of-service, or DDoS, attack. These cyberattacks typically overload a system with numerous requests from multiple virus-infected servers.

The attack comes two months after the crypto exchange reported that hackers had stolen $10.5 million in Bitcoin (BTC), Ether (ETH), XRP, Bitcoin Cash (BCH), Tether (USDT) and Zcash (ZEC). Executives later suggested some of the funds could not be recovered because the attackers had withdrawn $1 million in XRP and $2.8 million in ZEC through Poloniex.

According to data from CoinMarketCap, the total volume on Exmo has fallen 4.9% in the last 24 hours. The incident in December 2020 caused the exchange to lose about 5% of its total assets, though only Exmo’s hot wallets were reportedly affected by the hack.

Maria Stankevich, chief business development officer of Exmo that since the December 2020 breach, the exchange has implemented a number of measures to reduce the possibility of a future attack. She said Exmo transferred cryptocurrency withdrawals to the custody arm of hardware wallet manufacturer Ledger and created a bug bounty program to test the exchange, among other solutions.

As of Jan. 10, all crypto exchanges in the United Kingdom are required to be registered with the country’s Financial Conduct Authority, which verifies they are in compliance with Anti-Money Laundering regulations. However, a number of firms that have submitted applications, including Exmo, have received temporary registrations from the FCA allowing them to continue trading until July 9.

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Author: Cryptoconsulting

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