The possibility of an exchange getting hacked is much lower than the possibility of users losing founds by transferring them to their own wallet. I run a cryptocurrency forum and in 99% of reported cases users lost their founds by moving money from an exchange to a local wallet or even a hardware wallet. I always recommend everyone to keep it on an exchange.

There may be reporting bias going on. I suspect a high percentage of people who lose BTC by themselves will report it in a forum, since, as far as they know, their case might have unique details in which a more knowledgeable person might find a solution. But a low percentage of people who lose BTC due to an exchange hacked will report it, since the information they need is already in news and blog posts all over the web.

Exactly. And the top notch exchanges keep everything in cold storage AND they take out massive insurance policies on it. Keep coins there unless we are talking millions of $ worth.

The insurance coverage is limited and doesn't cover theft of individual accounts.

No exchange has a full insurance on their cold storage. Not a single one.

Honest question. How is this possible? Isn't it as simple as copy and pasting the public address?

Among other things, there's malware in the wild that rewrites public addresses when you paste them into the major exchange's "send coins" forms.

https://www.investopedia.com/news/new-bitcoin-malware-change...

Take ETH and ETC for example, they both have the same address format and accidentally sending from one chain to another results into your crypto being locked away forever.

You could ask this guy: https://etherscan.io/address/0xa8f889a066519ffb552a571d553b8...

Looks like he copy-pasted a corrupt version of the address. There are three transactions to this destination, from different exchanges.

I've had an instance where the withdrawal to my wallet seemingly didn't even make it to a block on the chain. This happened on Coinbase and took over 2 weeks to resolve. With their non-existent support I pretty much considered that money lost until the whole thing finally got resolved. But I can definitely see somebody fat fingering the wallet address being one of the bigger reasons.

Well, you’ve also got to keep track of the private key...

Counterpoint: I've lost all of the coins I held in local wallets (a variety of stupid reasons, but still gone nonetheless). I still had the coins that I'd been holding in Coinbase for years until I recently sold nearly all of them because I'm reasonably confident the Tether scam is going to trigger a massive price collapse across the board once folks notice they're just printing money over there and gobbling up about half of all miner output with funny money (it's really an astonishingly bold con).

There is risk either way, though. Say you want to sell fast because of something major (that is not just hype). If your monies aren't online you will be the last to try to cash out.

I agree, which is why I prefer to:

- keep only (most of) my long term holds in my hardware wallets (e.g. NEO, OMG, ...)

- spread my shorter term holds over several exchanges

I think the biggest problem is having a single point of failure. I personally keep about half my coins on exchanges, but no exchange holds more than 10%.

Storing your coins might be the best solution in theory, but in practice unless you're very savvy about the whole stack - hardware, OS, software and blockchain tech, it's hard to be sure you're not making a dumb mistake and exposing your whole stack.

Even hardware wallet can have vulnerabilities, and any form of "paper wallet" can be physically lost or destroyed.

My opinion is that you should hedge to make any loss tolerable, instead of trying to prevent it completely.

paper wallet generation software can also have bugs or be intentionally rigged and people have definitely reported both quite a bit.

You're right on with your approach -- I think the answer is multiple wallets -- even multiple brands of hardware wallets, multiple exchanges, multiple computers, multiple different types of paper wallets stored in different places, even multiple cryptocurrencies in case one has a catastrophic issue.

I am not saying your wrong, but that kind of defeats the point of using a crypto coin in the first place.

Absolutely! This is not consumer ready at all. It's important to continuously point that out.

You can keep just 10% on bitmex and use upto 10x leverage. If you get liquidated take another 10% out. If you make profit, send it back to the icebox.

I would have had Bitcoin at a much more opportune time if I could have gotten Armory to work. The idea that one must download the entire blockchain makes maintaining a wallet very difficult for some, esp. if the wallet software doesn't accept the data at the end of the dozens+GB download.

  The idea that one must download the entire blockchain makes maintaining a wallet very difficult

Totally false. There are plenty of wallets that allow you to connect to a decentralized network of servers hosting the blockchain.

Electrum, Multibit to name a few.

For Ethereum as well— the official wallets will let you run them in light mode which brings the chain size from approaching 100GB down to a few GB

NEM (the coin that was stolen) doesn't make any local wallet user download the chain. Instead, it uses a client server model.

https://nem.io/

As such, the wallet is super lightweight and easy for an average user.

Doesn't protect you from exchange hacks though.

maybe, but I don't recall encountering any of these years ago

They have been around for over 5 years. I used them 5 years ago..

You don't need to download the entire block chain to generate a receive address. You don't even need to download the entire thing to spend if you don't care about privacy. You can use vbuterin's python scripts to do the whole thing off public blockchain api's.

I've messed around with Bitcoin and I can't get past the fact that the top 2 most recommended wallets for macOS aren't signed by Apple and you have to verify a PGP signature manually (and the author's key is signed by a bunch of people I've never heard of so even that is a leap of faith). So I refuse to deal with amounts bigger than I assume will definitely get stolen.

eh, not all wallet require the whole blockchain. e.g electrum

You also have to take into account the probability of your exchange of choice being hacked vs. the probability that you'll get your own wallet compromised/destroyed/lost etc...

Given that cryptocurrencies have become pretty mainstream and given the average level of technical literacy among the general public I can understand why some might prefer to keep their coins in somebody else's hands.

You mean probability of people who run the exchange/work there deciding that they have a better use of your coinz?

Some of us think it's worth the risk so that's just your personal conclusion.

tx fees are around 10$ so it's meh