How To Know If A Crypto Exchange Is Legitimate

Currently, there are more than 1,600 cryptocurrencies in circulation. Together, they have a market cap of more than $289 billion. Naturally, investors around the world are eager to make money in this fast-growing industry, which explains the mushrooming of various platforms that support the trading of digital currencies. Although these platforms call themselves exchange platforms, they are similar to e-brokerage firms.

As the popularity of digital currency rises, so do scams. Scammers are targeting naïve and unsuspecting traders with all kinds of tricks. According to a study by CipherTrace, $4.26 billion has been stolen from cryptocurrency exchanges, investors, and users in 2019 alone.

Therefore, if you have any doubts or you are getting worried about your exchange’s legitimacy, you are not alone. It is critical to double-check their authenticity before continuing any dealings on the site.

Here are some tips that can help you know if a crypto exchange is legitimate or not:

Ensure you are using the correct website

Over the past years, crypto traders have fallen victim to scammers who build fake website landing pages that look exactly like the real thing. The counterfeit sites mimic well-known exchanges such as Binance. The sites collect your data, including passwords, which can be used to transfer money from your real wallet.

When signing into an exchange, you must look for the green ‘https’ tag, which usually appears just before the URL of a legitimate website in the address bar. Fake websites rarely go to the trouble of getting an ‘https’ authentication. Furthermore, counterfeit exchanges do not update their rates in real-time.

To be sure that you are on the authentic site, input the exchange’s URL manually into the address bar. A more natural way is to add the pages you often visit to your bookmark’s toolbar.

Other scammers build sophisticated mobile apps that walk and talk like a reputable exchange, but they are merely a front. Once on your phone, they can steal your account details and separate your hard-earned cash from you. Unfortunately, some of these apps have made it to legitimate app stores such as Google Play. So be always on the lookout.

Security

When selecting a digital currency exchange platform to trade with, it is essential to check the form of security features they employ to protect their system and users from attacks. A good exchange will put security first by utilizing a robust network and storing the majority of their users’ assets in cold storage, which is inaccessible remotely.

The following features have to be available to ascertain the authenticity of an exchange site:

• Two-factor (2FA) authentication during logins
• SMS and email alerts in case of a breach
• PGP encrypted email communication
• Cold storage for the majority of assets
• Withdrawal confirmation

In 2019, hackers were able to break through Bittrue’s security system, making it out with digital assets worth $4.2 million. They exploited a vulnerability in Bittrue’s Risk Control team’s second review process. The company promised to refund all its users and to revisit its security systems.

If you want to learn more about exchanges and how to keep your cryptocurrency safe, we recommend you to check out this course Blockchain 101 by ivan on tech.

Also, you might want to learn more about how to deal with cryptocurrency disasters.

History of past hacks

Before joining an exchange, it is a good idea to check its reputation. Consider its previous hacks, if any, and how they responded to the attacks. If the traders on the exchange suffered a loss, were they reimbursed? How long did it take for the reimbursement? Was the security system of the exchange updated after the compromise to ensure no such threats occur in the future?

You can get the answers to these questions by doing some online research. Some great sources of information are going through user reviews from individual users on forums such as Reddit or highly-esteemed review and recommendations sites such as Exchangeratings.

Remember that a well-established, long-standing crypto exchange with no history of past hacks is the safest option.

Verification

A lot of us find the process of signing up for any service frustrating and too much of a hassle. However, for the sake of protecting your money, you should look at this process from a different angle, especially considering that it may take up to several days to verify your identity. Authentic exchange platforms set up stringent verification procedures to protect the exchange as well as its users from laundering and all other forms of scams.

The vast majority of crypto trading platforms require some ID verification before a user can withdraw or deposit funds. Some legit exchanges, nonetheless, will allow you to remain anonymous.

Transparency: The people behind the exchange

It is essential to do your homework and learn all the significant things about your crypto exchange before making your first trade.

Any legitimate, above-ground establishment should not have a problem sharing information such as the location of their premises, owner details, number of employees, company mission and vision, and other relevant information. When an exchange fails to provide this kind of data, it could mean that the owner does not want to be associated with their own business. This is one of the red flags that can help you identify whether an exchange platform is legit or not.

This kind of transparency should reflect in every policy, including the exchange’s fees, registration process, KYC verification, trading rules, etc. When considering a crypto platform, take the time to go through any available information about these critical factors.

Customer support

Energetic and handy customer support is the backbone of any online establishment. In the cryptocurrency space, you want an exchange that listens and irons out issues quickly. Fake platforms usually run slow, ineffective, or non-existent customer service. The best ones have a wide range of options for reaching their support team, including live chat, email tickets, or hotlines.

Conclusion

With the inevitable rise of digital currencies in current and future years, it is becoming direr for traders to be able to tell between fake and legitimate platforms. There is no one formula to know if an exchange is real or not. However, by considering the factors we have listed above, you will stand a better chance to protect your assets from scammers.