Did you know that two Korean cryptocurrency exchanges where hacked this month. The more interesting reading, than the fact they were hacked, is the public comments on the articles.
First, let me assure you, that in both cases, it was not Bitcoin that were hacked, as some "news agencies" reported, but the wallets held by the exchanges. Why does this matter? These exchanges are centralization points and when you amass anything of value in a central location it becomes target for hackers.
I understand that crypto is new to most people, and the easy way to manage your coins is by leaving them on an exchange, but that is last thing you should do.
Think about it this way; would you put all your money into your physical wallet and ask a stranger to watch over it for you. If you won't do that in the physical world, why would you do it in crypto?
Right now, if you have crypto on an exchange, you need to either download a wallet or create a paper wallet and move your coins to it. The best solution is to create a hot wallet, one connected to the internet for your daily trades (similar to your carrying around cash in your purse or wallet) and a cold wallet, one not connected to the internet for the remainder of the coins. (If you want to learn more about wallets, see the "Cryptocurrency for Beginners" post). This means that most of your coins should be in a cold wallet. The cold wallet can be as simple as a paper wallet or if you want to spend a bit of money order a hardware wallet. Either of them will provide you better security and reduce your risk of loss. Just don't lose the wallet or you will lose the coins associated with it.
Now, on the point of this post and the comments I mentioned initially. People are stating that the problem with crypto is that it is not insured and unregulated, and therefore you cannot get a refund if your money is stolen, like you can in fiat (USD) based transaction. That is very true, but the fundamental point they either fail to realize or ignore, is where are those refunds coming from?
Is the bank, credit card issuer, merchant, company or government freely compensating you for the loss? Answer is simple: NO. In 2017, over $16 billion dollars was lost due to fraud and identity theft in the US and we as consumers are paying for that loss in terms of higher prices, interest rates and taxes. Depending on your source, that number is expected to climb to over $30 billion in the next few years.
Unlike crypto, where you are responsible for securing your coins and ultimately responsible should they be lost, we as consumers are paying for other mismanagement and poor security. You may not have lost any money in 2017 due to fraud, but you paid for the losses none the less. You see those losses are just spread out across all of us. If company has limited downside risk of financial impact are they going to harden their systems to ensure that your money and information is safe?
Maybe, but if you look closely at the numbers, it tends to indicates otherwise. In 2017, 1579 companies including 134 financial institutions lost 178 million records in the US, which means that over half of every man, women and child had their information stolem in one year.
We need to stop thinking that are getting a "free" refund and hold the companies accountable for the losses. This is a difficult challenge when the burden of the losses can so easily be shifted to consumers.
Is increased in regulation in crypto the answer? If all the increased regulation does is diversify the loss from one individual to society as a whole, I do not think that we should look to increased regulation. If regulation, somehow improves security, against the risk of loss in the first place, then it may be worth examining to protect the uninformed purchasers of crypto, but has that worked in other industries based on the prior statistics?
The next time an exchange is hacked and people loose their crypto, remember that at least you were not responsible for covering the loss, after all you are already covering enough losses in your normal transactions.
Final Point: keep your crypto safe, and spend time to move it off an exchange.