The blockchain ecosystem is littered with hundreds of cryptocurrency exchanges. The absence of proper coordination and regulation of exchanges has resulted in repeated losses of investment funds. Fraud cases associated with exit scams by founders and team members has become rampant among cryptocurrency exchanges.
On a personal note, a duly noted appreciation and acknowledgement goes to the CEO of Bitfxt exchange, Franklin Peters, whose contributions form the nucleus of this post. Peters is also a top member of the independent group, Stakeholders in Blockchain Association of Nigeria (SiBAN).
Apart from the contributions of Peters, every other aspect of this post is informed by my personal experience in the industry. I have been able to draw a line of similarities in how various cryptocurrency exchanges that we have today carry out their operations. Hence considering a few indices, every reader of this article should be able to figure out which exchange is genuine and which is not.
Keeping Your Assets Away From Thieves
To avoid running into platforms where your money would either get stolen or end up in stories, here is a list of red flags that you should always look out for. These red flags will help you to separate the wolves from the sheep in the blockchain industry.
- A dubious cryptocurrency exchange will not prioritise security. Security is the number one priority of the internet. Therefore any business modelled around this technology must prioritize the importance of the highest form of safeguarding measures available. Users are advised to take note of the difference between “http://” and “https://” when using their web browser to surf the web page of their exchanges. If a claimed cryptocurrency exchange doesn’t possess this “https://exchange.com” with the 🔒 sign in front, it is as good as an insecure exchange. Therefore always watch out for “https://” instead of “http://”.
- The user interface of many dubious crypto exchanges are odd, boring and cheap such that you will think it is designed by a twelve year old practicing coding. A standard cryptocurrency exchange must be easy to use for asset deposit, withdrawal and transfer. It should also have a simple user interface that displays buy and sell trade offers, 24hours traded volume, lists of available assets, asset trade charts and so on.
- Dubious crypto exchanges will hardly respond to mails, queries or chats. Customer service is very important in business, such exchanges don’t care about your problems of either deposit or withdrawal. One of the first things you should do before making a deposit into a new exchange is to send a support message by creating a ticket, for example create a ticket on “deposit” and ask “how swift will your deposited assets be available in that exchange wallet”. If you have to wait for 72 – 120 hours before getting a human response (not automated response), imagine how many hours it will take if the ticket is based on “withdrawal”.
- Proof of lawful registration as a real business operating their company in their claimed country or jurisdiction is not visible or accessible on their website, blog or white paper for vetting or confirmation. If the crypto exchange doesn’t have a precise legal business operating location with traceable evidence, kindly avoid such.
- Listing tons of shit coins or tokens without verification of the business model or use case. Dubious crypto exchanges are more into the listing fees harvest than saving users, investors and their funds from being scammed through a coordinated pump and dump action.
A Safer Industry Will Encourage Adoption
These are five (5) easy-to-figure out processes that will help you to verify the genuineness of any cryptocurrency exchange. There could be more factors that you may want to consider, such as knowing more about the team behind such exchanges. You may need to find out their track records and know the kind of reputation that they have created for themselves in the industry.
Cryptocurrency adoption would be easier if the number of negativities, especially in the earlier of losing investor funds is curtailed. Bad actors may be difficult to discourage, especially through persuasion. However, by adopting self-protective measures, they can be taken out of business and the industry will become more attractive for participants.
Personal security is personal business. Do well to ensure that you look really well before committing your funds into the hands of strangers and thieves who are impersonating the actual cryptocurrency exchanges.
Taiwo Adekola is a content developer, product analyst and graphics/creative designer. Taiwo is an active team player who exhibits a positive outlook, excellent composure. He is an engineer by profession but also well tutored in the areas of Blockchain, AI and Esports.