How can I ensure that my crypto-assets are secure when trading in a certain exchange? Even when I have my private wallet, I should deposit into theirs before trading.
That is the risk you take when giving someone else control of the private keys to spend your coins. When you transfer them to an address in custody of a centralized exchange, that means they have the corresponding private keys to spend it. You need to do your own research and determine if the exchange has good security measures to protect from breaches.
Many decentralized exchanges let you retain control of the private keys, but you also have to do your research on the software implementation to make sure it's design is secure with your keys.
How can I ensure that my crypto-assets are secure when trading in a certain exchange?
You must trust that organisation with your crypto-assets.
- trusting all the owners, all the staff, all the people allowed access to their premises (cleaners, maintenance engineers) and
- trusting the diligence and integrity of the developers of all the software used in that organisation. Including software developed elsewhere.
- trusting the diligence and integrity of the people who manage the internal computer networks and firewalls in order to prevent intrusion by outsiders and fraud by insiders.
You should carefully consider the history of exchanges such as MtGox and evaluate how you would have known not to trust them.
Since you cannot ensure the security of your assets, held for you by the exchange, you must take great care in investigating the ownership, trading history, legal jursidiction and reputation of the exchange. You should also not give them control over more money than you can easily afford to lose without hardship.
Agree. You can’t trade until you trust and you can’t trust until you know. However, I think that it’s impossible to find a universal way of deciding if a platform is trustworthy or not. For example, each time I need to make such a decision, I’m spending plenty of time on research. I’m very careful when it comes to money and I really don’t want to lose any of my investments. Sure, cryptocurrency is almost a synonym for risk, but it doesn’t mean that we should tolerate scams without any attempt to avoid them.
This question is not as simple as it may seem. Actually, the answer lies way deeper then it seems to be. To understand how to be sure that your assets are safe on this or another exchange, you need to find out which security means are offered by chosen trading platform. Sure thing, you need to deposit a certain amount of crypto there before trading. No one can trade straight from hardware or paper wallet :) But if you trust chosen platform enough to trade there, why don’t to deposit your coins to their storage either.