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Here we go again: A top centralized crypto exchange (CEX) was hacked, this time likely for the largest sum in humanity\u2019s history. We were lucky to avoid the worst \u2014 platform collapse and devastating consequences for the industry. The incident reminded us again that even the strongest market players are not invincible.\u00a0<\/p>\n
CEXs\u2019 freedom to manage customer funds comes with risks, reminding users that good old non-custodial storage is still the safest. With recent advances in security features, wallets safeguard coins and help users safely make the most of their crypto.<\/p>\n
After the $1.5 billion Bybit hack, things settled down quite quickly<\/a>. If the platform didn\u2019t keep reserves of 1:1 for client funds, however, the hack could have dire consequences for the entire industry. When FTX\u2019s liquidity problems surfaced in 2022, a bank run killed the platform in days, and billions of repayments are only just starting<\/a>.<\/p>\n Historically, CEXs have been a primary target for hackers. Between 2012 and 2023, centralized exchanges fell victim to 118 hacks, losing<\/a> almost $11 billion. This is 11 times more than money directly stolen from blockchain networks and cryptocurrency wallets. Again and again, we see how vulnerable crypto market titans can be. The golden \u201cnot your keys, not your Bitcoin\u201d rule remains highly relevant.<\/p>\n Making a centralized crypto exchange deposit means delegating the storage of your money. CEXs keep all private keys and hence have complete control over customers\u2019 funds. Besides a smooth trading experience, this entails a few unpleasant consequences.\u00a0<\/p>\n First, centralized platforms store substantial amounts in a few wallets, making them a frequent target for hackers. CEXs use cold wallets and multisig transactions, which is supposed to be an ultimately secure method. This framework, however, relies on third-party infrastructure to merge signatures, and these systems turned out to be vulnerable<\/a>. When traders let CEXs keep their private keys, there\u2019s a chance they will lose all their funds one day for reasons they entirely cannot control.\u00a0<\/p>\n In addition to hacks, there are many other ways we risk our funds when delegating custody. Centralized exchanges can freeze accounts for sophisticated legal reasons, impose withdrawal limits and mismanage funds, leading to bankruptcy. History suggests these things often happen unexpectedly \u2014 and the only way to be prepared is to take responsibility for storing our money in our own hands.\u00a0<\/p>\n When you store crypto in a non-custodial wallet, your private keys reside on your device in an encrypted form. You have complete control over your funds, unlike centralized platforms where you have none.\u00a0<\/p>\n Self-custody is not zero-risk. You can engage with any decentralized finance (DeFi) protocol or swap any \u2014 even unlisted \u2014 coins. This freedom comes with great responsibility: DeFi platforms have become a more frequent attack target<\/a> over the last few years. Developers often focus on rapid growth, leaving security measures behind.<\/p>\n Today\u2019s wallets, however, support users\u2019 freedom, giving them more tools to protect their funds than ever before. These start with a few layers of encryption, making sure no one but you can reach your private keys. A passcode often verifies outgoing transactions and decentralized application (DApp) permissions, so there\u2019s dual protection for daily wallet activities.\u00a0<\/p>\nNot just encryption<\/strong><\/h2>\n