The case of Kucoin, and moving your assets out of exchanges

The recent hack on Kucoin isn't anything new to the cryptocurrency world. Its terrible, and I'd hate to experience what the Kucoin owners would have felt seeing such a large volume go into the ether, but for us cryptocurrency users we've all seen this before.

The typical security recommendations for holding cryptocurrencies tend to fall on deaf ears, as our human perception for risk management is pretty awful. Especially when you add the time factor on top - with enough time using a cryptocurrency exchange, the more complacent we become with the security of the system. This hack shows just how crucial it is to make sure you take the extra step to hold outside of exchanges, not in them, regardless of how much you trust them.

The power of cryptocurrency should always remain with the individual - that's why cryptocurrency exists in the first place. There's no need to hand give any power to 3rd parties, except if you need to make specific transactions like selling bitcoin for fiat currency (and even that might be a short-lived requirement with the fast-growing DeFi world).

We built Signata to keep the power to yourself, the user. Signata is zero-knowledge when it comes to your cryptocurrency keys - we know we can't provide a guarantee that our service will never be compromised, so we've instead left the control to you. the user. Only you see your private keys, and only you control your crypto assets. We intentionally do not want to see your private keys - all that would ultimately achieve is putting a huge target on us.

Whilst I'm obligated to sell the product I've built to you on this blog, you still don't even need a service like Signata to keep yourself decentralised - Signata is effectively a simplification of the paper wallet process with the ease-of-use of YubiKeys, but you can totally make paper wallets yourself, or use offline wallet software, transfer your assets to those, and then move them back into exchanges when you want to (assuming the exchanges will support importing private keys). Just make sure you take the additional steps on top to back up your wallets, otherwise something like a house fire or a failed hard drive could render you totally coinless.

Note: those paper wallet links above are not endorsements of those services - do your own research into creating a paper wallet if you wish to do so, as you need to make sure the website you are using is not taking a copy of the keys that are generated.

It's up to you as a cryptocurrency user on how much effort you want to take to protect your own assets, but at the very least I impore you to take action to move currency out of the control of exchanges. By all means keep using exchanges - there's no reason not to - but don't hold in exchanges. Hold in services that let you keep ownership of your assets, like Signata.

Timothy Quinn

Timothy Quinn

Managing Director of Congruent Labs