• Cryptocurrency exchanges make it easy to buy and sell the currencies you want with low fees and strong security features.
  • Cryptocurrency exchanges function similarly to stock exchanges and other exchanges for other kinds of assets. Put differently, the exchange connects buyers and sellers.
  • There have been substantial hacks on at least 48 cryptocurrency exchanges, which have resulted in the shutdown of numerous cryptocurrency platforms since 2012.

Cryptocurrency exchanges are online platforms hosted by companies or other entities that make it convenient for users to purchase and sell cryptocurrency.

When cryptocurrency was first introduced, you had to manually enter a command in a terminal to send a coin to someone. Eventually, user interfaces were designed that made it easier to access cryptocurrency. Realising that cryptocurrency could only make a mainstream appearance by making it less technical for average users, developers created exchanges that hosted services for people interested in owning and transacting in crypto.

Cryptocurrency exchanges now work similarly to a broker, giving you the tools to trade, buy, and sell cryptocurrencies like Bitcoin, Ethereum, and Tether.

How do crypto exchanges work?

Crypto exchanges work in much the same way as exchanges for other types of assets, like a stock exchange. In other words, the exchange matches buyers with sellers.

Before you can start trading cryptocurrency, you’ll need to register and fund your account. From there, you can create different order types to buy or sell, or even speculate on, cryptocurrencies. These orders are then compiled in what’s known as an order book, which lists the amounts of cryptocurrencies that users want to buy and sell as well as their desired price. Pairs of buyers and sellers are then matched up by the exchange based on this information.

Also read: What is open banking? A short guide

Cryptocurrency exchange hacks

Since the internet’s founding, there have been sophisticated methods used daily to pose a threat to cyber security. Targeting cryptocurrency exchanges, criminals and organised hackers hope to take advantage of the high profits that come with cryptocurrencies like Ethereum and Bitcoin. At least 48 cryptocurrency exchanges have experienced significant hacks since 2012, which has led to the closure of many cryptocurrency platforms. In 2019 alone, hackers gained access to a record 19 cryptocurrency exchanges; however, this number has been declining in recent years.

The following cryptocurrency exchanges are examples that have been affected by cyber security hacks that have resulted in a loss of customer assets or suffered from a data privacy breach since their inception to the market.

Also read: What are the challenges of internet governance?

Crypto

The first crypto exchange to be hacked in 2022, Crypto is one of the world’s most popular crypto apps and well-known exchanges. On January 17, around 483 customer accounts were compromised according to reports. The exact cause of the breach is yet to be confirmed, however, the CEO of Crypto Kriz Marszalek confirmed the security breach which caused the exchange to shut down certain services for 13-14 hours. A total of US$66,200 in other currencies were stolen from the popular cryptocurrency exchange.

Binance

Binance is one of the world’s best cryptocurrency exchanges by popularity and rating 1% by trading volume and overall liquidity. The platform is now on the list of hacked exchanges due to a large-scale security breach that occurred on May 7, 2019. Hackers stole 7,000 Bitcoin or approximately $40 million in assets from a single hot wallet that contained about 2% of the total BTC holdings.

GDAC

South Korean crypto exchange GDAC announced that a hack had occurred on the GDAC hot wallet that stored several crypto assets including Bitcoin, Ethereum, WEMIX tokens, and Tether. Almost 61 Bitcoins were stolen in the incident with a total deficit of almost USD 13 million, which represented around 13% of their total asset holdings according to their official statement.

The growth of the cryptocurrency sector has led to the creation of numerous cryptocurrency exchanges, each with varying assets available. Each of these exchanges also offers differing funding methods, trading pairs, and fee structures. Perhaps the most important offering any of these exchanges can focus on is security.