Kraken CEO Jesse Powell has urged crypto investors not to leave funds on exchanges following the attack on Cryptopia last week, which saw some $4 million worth of tokens stolen from the exchange. Powell took to Twitter in the wake of the attack, the first of 2019, to advise crypto investors to keep the majority of their funds on hardware wallets and only keep what they need to trade on exchanges. He also claimed that decentralized exchanges were not the solution many expect them to be.
PLEASE do not store more coins on an exchange (including @krakenfx) than you need to actively trade. Use @LedgerHQ or @Trezor. DEXes are not a panacea — look at The DAO. Open source just means exploits will be discovered sooner (probably not by good guys). 🙏 https://t.co/LmzhtCjpM0
— Jesse Powell (@jespow) January 16, 2019
Increased Risk to Exchanges
Powell was responding not just to the Cryptopia hack itself, but also to the response from Binance CEO CZ who claimed that leaving funds on “the most reputable, proven secure, exchanges” was an alternative option to personal storage. Kraken itself has yet to be hacked despite being in existence for eight years, but Powell is all too aware that this unblemished record can be lost at any minute, and doesn’t want customers to risk more than necessary.
He has previously warned of the increasing likelihood of exchange hacks and the security measures required by exchanges as the sophistication of attackers increases. In November 2018, he said during an episode of the ‘What Bitcoin Did’ podcast that he was constantly paranoid about security, having imagined scenarios from armed attacks on the Kraken office to hackers in nearby buildings using telescopes to track keystrokes and then accessing systems remotely.
Decentralized Exchanges not the Answer
Powell also claimed that decentralized exchanges are “not a panacea”, stating that exploits will be discovered more quickly and not by “good guys”. This statement, coming from someone who knows a thing or two about crypto exchanges, blows a hole in the theory that decentralized exchanges, although slower, will be more secure due to a lack of centralized servers. However, wherever code and specifically smart contracts are present, hacks are always possible. Powell’s advice to keep the bulk of your crypto offline in a hardware wallet would seem to be the safest option, regardless if it’s a battered old Ledger or a $100,000 crypto wallet watch, with only a small amount kept on exchanges for trading purposes.