Security woes of centralized exchanges aren’t the only factors that give investors and regulators cold feet. The recent cryptocurrency news published by Coin Desk of Bitfinex misleading its investors of over $800 million has aggravated the issues of security and transparency in the crypto world. Fortunately, some exchanges have taken cognizance of these issues and are working toward proving a transparent and secure environment to crypto investors.
Cryptocurrency exchanges often struggle with the issue of transparency. Transparency mainly requires to prove solvency and legitimate trading volumes. Proof of solvency is crucial because investors need to know what risks they would be taking with a particular financial entity holding their funds. However, most exchanges have issues with disclosing their financial details publicly. However, a few technical advancements have promised glimpses of provable exchange reserves that choose to remain private. Tools such as Messari 10 and BTI serve investors with better information.
Ramping up Security
Centralized exchanges are the single biggest threat to security. That is why many initiatives in the crypto sector strive to remove centralized exchanges entirely or end their custody if the former isn’t possible. The custody of exchanges over the funds of users is a security threat. That is why many technologies for trust-minimizing are working to circumvent the centralized charge of funds. The success of this method would ensure better security and transparency in the crypto world.
Due to the tarnished history of exchanges and their closed nature, security, and transparency in the crypto world have become critical issues. However, with better blockchain analysis, projects have begun to look at these aspects with more sincerity and eagerly to be completed. To this end, most projects today are not only considering declaring their financial details openly but also remove the need for custody of user funds.