When it comes to cryptocurrency exchanges, one of the top concerns for many users is safety. At the end of the day, this asset class is immature and dominated by hacks, therefore it’s important to ensure that your assets are protected.
You probably already know, but Binance is the leading cryptocurrency exchange in the industry and claims to be one of the safest. But is it safe to use Binance?
Don’t worry, in this article, I will be covering the safety measures Binance has employed to protect users as well as the risks associated with the platform. By the end, you should have a better understanding of how safe the exchange is.
So without further ado, let’s jump right in.
Binance security measures
First off, Binance has taken several steps to ensure the security of its platform and the assets of its users. These measures include:
- Cold storage: Binance stores the vast majority of its digital assets in offline, cold storage wallets, which are not connected to the internet and are therefore less susceptible to hacking attacks.
- Two-Factor Authentication: Binance requires users to enable two-factor authentication for all withdrawals. Essentially, it is a security measure that requires users to provide an additional form of authentication in addition to their password when logging in. This is typically done by sending a code to the user’s phone or email, which the user must enter to access their account. By requiring users to enable 2FA, Binance can add an extra layer of security to its platform and protect against unauthorized access.
- Data encryption: Binance uses advanced encryption to protect user data. Sensitive information such as government issued identification and addresses are encrypted to prevent unauthorized access by hackers.
- SAFU emergency fund: To protect its users and their assets, Binance has established the Secure Asset Fund for Users (SAFU). This fund is available to reimburse users in the event of a major security breach on the platform. With $1 billion set aside for this purpose, Binance can ensure that it has the financial resources to meet its obligations to users.
- Notifications: If Binance’s system detects any unusual activity on your account, you will receive immediate notification via email. This allows you to be aware of any potential threats and take action to protect your account.
- Real-time monitoring: Binance also has real-time monitoring in place to track every action on the exchange. Its algorithm analyzes activity to determine if it is unusual or suspicious. If any suspicious activity is detected, withdrawals from your account will be temporarily frozen for a period of 24 to 48 hours. This freeze is intended to give you time to take action if your account has been hacked, or to contact customer service to have the freeze removed if the activity was authorized
Risk management team
Binance’s risk management team also plays a critical role in ensuring the security of the platform. This team is responsible for identifying and mitigating potential threats to the platform and the assets of its users. They do this through measures several measures.
Firstly, they conduct regular security audits to identify and address potential vulnerabilities in their systems. Secondly, the risk management team performs penetration testing to simulate cyber attacks and identify potential weaknesses in the platform’s defenses.
Not to mention, they have ongoing assessments and incident response planning to identify potential risks and help mitigate them.
That being said like with most centralized exchanges there are several risks. As Binance hold users’ funds in central, online wallets they are vulnerable to hacking attacks and other security threats. Ultimately, they represent a single point of failure.
Next, when you use a Binance you provide custody of your assets to the exchange. As a result, if the exchange experiences technical issues or goes out of business, you may be unable to access your funds. In other words, there is a significant counterparty risk to consider.
Lastly, Binance may be subject to future regulatory oversight. This could potentially harm operations depending on what laws are passed.
Has Binance been hacked?
Unfortunately, like most other cryptocurrency exchanges Binance has been hacked. This was evident in May 2019 when a hacker stole over 7000 Bitcoin worth $40 million at the time. They targeted the company’s hot wallet as it has more attack vectors due to its online connection.
That being said, after this incident Binance reimbursed all affected customers which ultimately shows their commitment to protecting users funds.
As you can see, Binance has many security procedures and technologies in place to protect users’ assets. From the $1 billion SAFU fund to its risk management team this makes it one of the most secure platforms in the industry.
That being said, with the recent collapse of FTX it is important to remain vigilant. At the end of the day, not your keys not your crypto. Therefore, only store what you can afford to lose on the exchange.
I hope you found this article useful and thanks for reading it. Want to know whether Coinbase is safe? Click here to read my previous article