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Bitcoin was designed as a peer-to-peer cryptocurrency, but as the network expanded, there was no way to avoid the growing influence of centralized crypto exchanges. Soon after Bitcoin’s launch, more people wanted to enter the system. While mining was an affordable option at the time, buying crypto with fiat money was more convenient, especially for those who didn’t know how mining worked. The emergence of digital platforms that converted fiat to crypto and vice versa was a natural consequence.

In the first years, crypto exchanges represented an underground space, but one particular platform managed to monopolize the market — Tokyo-based Mt. Gox. In 2014, the service accounted for 70% of all Bitcoin transactions. Everyone knows what happened next — about 850,000 Bitcoin was stolen from Mt. Gox’s wallets, which were worth a total of $450 million at the time. This was when crypto exchange operators realized that security should be the highest priority in order to maintain client trust. As for Mt. Gox, it was forced to declare bankruptcy.

The gradual shift to a more secure ecosystem

Newer exchanges learned the lesson from Mt. Gox and started to implement a series of security measures meant to protect clients’ crypto funds while maintaining a high degree of liquidity and scalability.

The first thing they did was to move the greatest part of the client funds from hot wallets to cold wallets. The first category of storage option has ongoing access to the internet, making it prone to potential hacking attacks. Cold storage was preferred instead, as it keeps the private keys away from the internet.

Soon, third-party custodian services became widely solicited by crypto exchanges. Crypto vaults utilize multi-authorization wallet management systems, merging cryptographic, IT and physical security features.

Another security measure that has almost become mandatory with most crypto exchanges is two-factor authentication. This feature requires users to employ two different devices in order to sign in with the platform.

The evolution of security solutions went hand-in-hand with the development of Anti-Money Laundering and Countering the Financing of Terrorism measures. Also, many crypto exchanges have started to adhere to Know Your Customer practices by requiring clients to pass through a verification procedure that would confirm their identity. It was especially true for exchange services operating in jurisdictions with strict AML and CFT rules.

In the last few years, some crypto platforms introduced additional minor security measures, like withdrawal whitelists and anti-phishing codes. The former enable users to withdraw crypto funds to whitelisted wallets only. Potential hackers cannot move a client’s funds to unknown wallets while this feature is enabled. As for the anti-phishing code, it tells users if the email notifications are genuine and come from their registered exchange service. This option keeps fraudsters away.

So, are crypto hacks a thing of the past?

Not really. Despite the available security options, crypto exchanges continue to encounter serious troubles to this day. Last year, Japanese exchange Coincheck was deprived of over $530 million worth of Nem tokens.

Other crypto exchanges that were hacked in the last three years were Bithumb, Binance, OKEx, BitGrail, Coinrail and Zaif, among others.

Elsewhere, other exchanges can brag about their clean history. One such example is HitBTC, a crypto platform that was founded in 2013. HitBTC precedes the Mt. Gox hack, so it is one of the oldest exchanges in existence. It uses advanced encryption technology, cold storage and two-factor authentication to ensure the highest possible degree of security.

The safety measures helped HitBTC become the largest spot trading exchange out there, with more than 800 trading pairs and over 500 digital assets listed, including Bitcoin, Litecoin, Ether, EOS and others.

Decentralized and hybrid exchanges

Decentralized exchanges have recently become popular thanks to their status of the most secure version of a crypto exchange. They are the perfect solution because their services are noncustodian, meaning that users have to hold their private keys in their own digital wallets. Exchanges that enter this category only handle crypto conversions, allowing traders to take responsibility for storing their funds.

Decentralized exchanges use blockchains as the main layer to reside on. Thus, if their network of nodes is well distributed and relatively wide, these platforms are hack-resistant.

However, decentralized exchanges lose on the compliance part because there is no central authority to implement the required AML and KYC measures. Thus, many of these exchanges are not legal in certain jurisdictions.

Hybrid crypto exchanges address this issue by offering a certain degree of decentralization as well as centralized features. They allow users to have control over their private keys but require them to comply with the law by passing through a verification process. The goal of hybrid exchanges is to ensure both the security of decentralized exchanges and the flexibility of centralized ones.

While decentralized and hybrid exchanges implement the latest security architectures, this is surely not the end of crypto exchanges’ evolution. Some experts warn that blockchain networks might be threatened by advanced quantum computers in the future. Quantum computers are growing fast, with IBM and Google leading the quantum race. Many crypto traders are worried that these computers will be able to bypass the cryptographic barriers and even enable 51% attacks. If these threats become real, crypto exchanges will have to develop new security solutions.

Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor this article can be considered as an investment advice.

Cointelegraph By Anatol Hooper , 2019-11-25 18:27:00 ,

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NewsBlock © 2019 - 2020 All rights reserved.

NewsBlock © 2019 - 2020. All rights reserved.

While Bitcoin’s price seemingly moves without rhyme or reason — collapsing by dozens of percent and embarking on face-melting rallies on a whim — the cryptocurrency market is filled to the brim with fractals.

Related Reading: Analyst: Bitcoin Price Likely to Fall to Low-$8,000s as Chart Remains Weak

A brief aside: A fractal, in the context of technical analysis and financial markets anyway, is when an asset’s price action is seen during a different time. This form of analysis isn’t that popular, but it has proven to be somewhat valuable in analyzing Bitcoin.

One recent fractal popularized by a well-known cryptocurrency trader is implying that BTC is going to return to the low-$7,000s in the coming days.

Bitcoin Fractal Implies Retracement to Low-$7,000s

A well-known crypto trader going by “Tyler Durden” on Twitter recently posted the chart below, which shows that a Bitcoin price fractal may be playing out. The fractal has four phases: horizontal consolidation marked by one fakeout, a surge above the consolidation phase, a distribution, then a strong drop to fresh lows.

If the fractal plays out in full, BTC could reach the low-$7,000s again, potentially as low as $7,100. This would represent a 20-odd percent collapse from the current price point of $8,800.

It isn’t only a fractal that is hinting Bitcoin has the potential to visit its lows. As we reported on Saturday, Bloomberg believes that if the GTI Vera Convergence Divergence Indicator flips red, a downtrend could push the cryptocurrency back to $7,300.

Related Reading: Stephen Colbert Pokes Fun at Bitcoin in Monologue: Mainstream Gone Wrong?

Can Bulls Step In?

But again, many believe it is irrational to have such bearish interpretations of the cryptocurrency’s chart at the moment. As reported by NewsBTC earlier, Popular crypto trader Mayne recently noted that the “people waiting for $6,000” are irrational. He quipped that Bitcoin retracing and consolidating after its fourth-biggest bull move in history ($7,300 to $10,500, a 42% gain) is perfectly par for the course, but noted that it’s totally possible we can go lower from $8,800.

The medium-term technicals support this.

Trader and CoinTelegraph contributor FilbFilb found that by the end of November or start of December, the 50-week and 100-week moving averages will see a “golden cross,” which he claims is far more significant” for the Bitcoin market that other technical crosses.

Also, a Bitcoin price model created using Facebook Prophet machine learning found that the leading cryptocurrency is likely to end the year at just over $12,000. What’s notable about this model is that it called the price drop to $8,000 months in advance, and forecasted a ~$7,500 price bottom for BTC.

To put a cherry on the cryptocurrency cake, Crypto Thies observed that when Bitcoin bottomed at $7,300, it bounced decisively off the 0.618 Fibonacci Retracement of the move from $3,000 to $14,000, which correlates with the two-week volume-weighted moving average. He added that summer 2019’s consolidation was marked by Bitcoin flipping major resistances into support levels, implying that a bullish reversal and subsequent continuation is likely possible in the coming weeks.

Featured Image from Shutterstock

Nick Chong , 2019-11-10 12:00:38

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