Why cryptocurrency exchanges do not provide private keys ?

In most of the case you don’t have a private wallet on your favorite exchange. They have a bunch of hot wallets for each coin and a database that states how much coin you have. This allow to make trading almost instant without fees (for them) and move the funds easily using their local database and not making any transaction on the actual blockchain.

That’s why in most of the case you will see the deposit address often the same for all users (on cryptonote coins) but a unique and different Payement ID.

So they can’t provide they private key as you will have access to all the funds from this wallet. Most likely they will recommend a wallet to use, and then you can just send your coins there.

The responsibility of the exchange

If we look back at the last years of cryptocurrency and scam/hack exchange the list is pretty impressive …

So what happen when an exchange get hacked ? How do the users get their funds back ?

Since the exchange has to physically run the coin software to be able to interact with it and process transactions, the exchange should be the full and only responsible for running the proper services and maintenance related to each coins. Therefore a technical team should be aware of how each coins software works to implement into their exchange app. (this is in theory)

But in reality and in most of the case the end user is going to loose everything and not recover any funds back.

Reuters estimates that criminals have stolen over 980,000 Bitcoins from exchanges since 2011. Today, those stolen coins would be worth more than $3 billion — and that’s before you even consider all the other altcoins that have also been victim to hackers.

Right now the market has dropped from $800 billion to $120 billion but that’s a lot of money, and it’s easy to see why cryptocurrency is so attractive to hackers and cybercriminals.

So why so users are intended to leave coins on exchange wallets ?

Maybe because it is convenient to have all the coins in once place ? For sure it is easy to manage and you do not have to send the coins in and out to process exchanges transactions. But remember. Not your keys not your crypto.

Or because it’s too complicated to have all the software wallets installed on our computers or mobile device ? What about holding less crypto ? Do you really follow all the projects that you step in ? Holding more than 10 crypto looks risky. 5 seems to be the perfect number and the perfect combination to use the official wallets so you can own the private keys and follow the project.

Or maybe because the way how the cryptocurrency exchanges are working is wrong ? Is it time for changes ?

Time for changes

Let’s make a simple comparaison of what exists now and what we could create.

Exchanges today:

A lot of users are using exchanges to store their assets

User do not own private key of the exchange wallet

Exchange have to run a wallet for each coins they are trading this means they get exposed to security threat directly on the wallet or coin software

Repetitive fees (varies from 0.2 to 5%) for each exchange transactions

Some charge for deposit (a fix commission for each coin)

Most charge for withdrawal (a fix commission for each coin)

None use an hotline number

Most of the exchanges use candle stick and ‘stocks style’ charts impossible to understand by most of the common users

Crypto to Crypto exchanges require KYC (Know Your Customer) identification level way too high

Crypto to Fiat inverse are freezing multiple accounts

Most of the exchange use double authentification features as the highest security for login into your account

No assistance locally

With BLOC we are trying to build the ecosystem for the Cryptocurrency era.

We are working on our project called PAYCHANGE an innovative cryptocurrency platform to connected buyers and sellers. Users will be able to use, spend, exchange any type of cryptocurrency in the same way as they could with any other currency, but in a quicker, cheaper and more secure environment than it is currently possible in any traditional bank or other current cryptocurrency exchange.

Cryptocurrencies mass adoption is near.

Could PAYCHANGE be the trigger ?

It can definitely help. It’s not easy to understand how to buy and store securely cryptocurrencies online or in the real life for people that are not familiar with this digital universe. PAYCHANGE aims to provide services required to change the way we pay and get paid in our everyday life, by delivering one of the best Cryptocurrency online secure platform to use, buy, sell, and transfer cryptocurrencies.

What are the most innovative features of PAYCHANGE

There is many but one of the first is security. There will be different services that require different level of security. Once you will be able to register an account or use the seller area for exemple to list your business, this kind of actions will be done with a standard level of security using two factor authentification. To gain access to the trading area you may need to use an hardware device specially designed for BLOC and PAYCHANGE to increase security and offer what could be the most secure exchange ever created.

0% fees commission. No fees on trading, withdrawals, deposit or anything else. PAYCHANGE will work as a monthly or yearly subscribtion that can be paid in BLOC following the services you might need. Different package for different use.

A dedicated cryptonote coins exchange but not only. We will focus on include the cryptonote projects first simply because we understand and already work well with the cryptonote technology. Right now only TradeOgre offer an exchange service exclusively for cryptonote based coins and we think they need a competitor. BTC might be the only cryptocurrency pair for trading to start but more should follow with the time.

Fiat to crypo SWAP with small amounts. We would like for the launch of PAYCHANGE to offer a new way to buy and sell cryptocurrency with USD or EUR for a amount of maximum $50USD.

No KYC for crypto to crypto. Exchanging cryptocurrencies should not be limited to the color of your passeport or any other non sense limitations that appears every day. Trading crypto to crypto assets on PAYCHANGE will not require for you to upload your personal document and we will do everything possible to keep this feature as much as we can for the respect of user privacy. KYC might be needed only when exchanging fiat currencies to crypto and will follow the standard and legal procedure.

We will offer 2 kind of trading both easy to use and to understand

PAYCHANGE SWAP

We will use exactly the same concept as how blockchain works. PAYCHANGE will create blocks containing transaction of users that agreed to exchange the same assets. The PAYCHANGE SWAP will have different lifetime and different amount that can be set by the seller or the buyer. A PAYCHANGE swap can contain multiple senders and beneficiaries and all the transactions inside the swap will be made public.

Once everyone agree on the amount of the swap, the transaction is processed and everyone receive the funds to the provided wallet or bank account.

There is no hack possible here since we do not hold any wallet. PAYCHANGE connects a buyer and a seller agreed together to exchange assets.

Simplified trading

Let’s forget the candle stick chart and re-invent what cryptocurrency trading is all about. The simplified trading on PAYCHANGE is similar of what exist now on other cryptocurrency exchange except that we want to force the users to withdraw their coins once exchanged on the platform, providing links and tutorial for each of the supported coins on PAYCHANGE so the end user can understand how to use original wallets and withdraw to their wallet safely.

We will be running hot and cold wallets for each coins supported on the platform so this can offer a potential security breach. We think it is possible to run an exchange and empty the wallets every sometime. As soon as funds are exchanged they would be withdrawn in less than 24h or a preferred time.

Like this even if the wallets get hacked, they are empty or small amounts which limit the potential hack so the users can recover their funds.