Hodlers Put Faith in Centralised Exchanges as Platforms Flex High-Tech Security - Bitfinex blog
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Hodlers Put Faith in Centralised Exchanges as Platforms Flex High-Tech Security


ROAD TOWN, British Virgin Islands – October 13 2022 
– Bitfinex (https://www.bitfinex.com/), a state-of-the-art digital token trading platform, working with Chainanalysis, the blockchain data platform, has found that crypto traders are more comfortable holding digital tokens on exchanges amid a growing threat of hacks in the decentralised finance (DeFi) space.

This year has witnessed a flurry of security breaches and code exploits on DeFi protocols with the decentralised nature of DeFi platforms providing hackers with open access to code that may reveal vulnerabilities. This is in contrast to centralised exchanges, which have invested in heavy duty defences that protect users’ digital token holdings.

Many centralised exchanges conform to increasingly stringent secure operating systems standards and audited third-party security system checks. Security systems put in place include Two Factor Authentication (2FA), distributed denial-of-service (DDoS) protection along with regular systems testing to guard against potential vulnerabilities. Furthermore, firewalls and intrusion detection systems are now part of exchanges’ armouries to guard against potential threats.

The number of thefts and the total value stolen from centralised exchanges has dropped by about 58% from $972M at its peak in 2018 to $413M last year. So far in 2022, $80M has been stolen from centralised exchanges. This contrasts with DeFi which now accounts for 97 per cent of theft losses, standing at $2.8B in 2022.

According to Chainalysis, year-end Bitcoin balances for centralised exchanges remain near all-time highs in 2022 in spite of prevailing market conditions, suggesting users are increasingly comfortable with holding their assets on centralised exchanges. Year-to-date Bitcoin balances for centralised exchanges stand at 6.9M, an increase of 11 per cent from 6.2M at the end of 2019.

“The Chainalysis findings point to the increasing resilience of centralised exchanges against hackers,” said Paolo Ardoino, CTO at Bitfinex. “While we always advise cryptocurrency users to take security into their own hands by taking steps such as holding tokens in cold storage or using a hard wallet device, the custody solutions deployed by centralised exchanges have advanced considerably in recent years.”

“Bad actors often look to exploit the newest technologies,” said Kim Grauer, Director of Research at Chainalysis. “While centralised cryptocurrency exchanges were prime targets for hackers in the early days of crypto, many of these services have spent years investing in security and compliance. As a result, we’ve seen fewer and fewer successful attacks on these businesses.”

In spite of market turmoil, Chainalysis has seen continued usage of centralised exchanges. The blockchain analytics firm saw multiple days in June where more than 1 million unique wallets sent funds to exchanges, hovering north of 800,000 most recently.

“We’ve found in our research that many crypto fundamentals have been remarkably stable this year, despite the market turmoil,” said Grauer. “Specifically, HODLers are holding, and if anything, we saw an increase in the accumulation of crypto by longer term holders. Much of this crypto is being held on centralised exchanges.”

Hodlers’ faith in centralised exchanges has been bolstered by the performance of platforms during extreme market conditions. “Centralised exchanges have generally remained stable in spite of the liquidity crunches experienced by a few major platforms,” Grauer concluded. Notably, Bitfinex offers customers an institutional-grade, low-latency platform. For example, the platform offers execution speeds as fast as 4 milliseconds for its institutional customers that can connect to the exchange matching engine via proximity hosting services. While such services are designed for major market makers trading on the platform, other customers also benefit from having access to a high performance platform as orders can be met regardless of market conditions.

Bitfinex is leveraging its position as a one-stop shop for digital token trading offering a variety of services, including spot and margin trading, staking, borrowing and capital raising.

*All users of www.bitfinex.com are subject to Bitfinex’s terms of service (“TOS”). Please note that U.S. persons (as defined in the TOS), among other prohibited persons (as defined in the TOS), are strictly prohibited from directly or indirectly holding, owning or operating an Account (as defined in the TOS) on www.bitfinex.com. 

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About Bitfinex
Founded in 2012, Bitfinex is a digital asset trading platform offering state-of-the-art services for digital currency traders and global liquidity providers. In addition to a suite of advanced trading features and charting tools, Bitfinex provides access to peer-to-peer financing, an OTC market, and financed trading for a wide selection of digital assets. Bitfinex’s strategy focuses on providing unparalleled support, tools, and innovation for professional traders and liquidity providers around the world. Visit www.bitfinex.com to learn more.

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