Signing Up To A New Cryptocurrency Exchange For A Free $10 Is A Bad Idea

By Contrast Crypto on Altcoin Academy

Don’t get me wrong, I love free money — but sometimes free money isn’t free. Sometimes the risks of free money can outweigh the rewards.

When a cryptocurrency exchange offers you free money — usually to the tune of $10 to $20 — you must consider whether it is worth both your time, and potential risks involved. Newer cryptocurrency exchanges requiring you to pass Know Your Customer (KYC) — which means giving up your drivers license or passport in order to prove your identity — tend to be the ones offering free money upon sign-up more often than not — so not the most trustworthy of sources.

It’s not to say newer cryptocurrency exchanges can’t be trusted, but they have had little time to demonstrate that they can be trusted.

So, is giving up your passport or drivers license details — and even residential information — really worth $10?

When you sign up to cryptocurrency exchange — thanks to government regulations — you’re more than likely using a service with KYC checks in place that requires certain documents to be provided to prove your identity due to Anti-Money Laundering (AML) and Counter-Terrorism Funding (CTF) laws. This usually means uploading a copy of your passport or drivers license to the exchange platform, as well as some form of proof of address to prove to the regulators that you are a real person.

Some Personal Data You Provide That Can Be Used Against You

Full Name — “Name as it appears on the card,” is a widely used security check for online purchases.

Date of Birth — Commonly used during account creation, and often used to verify existing accounts.

Drivers License Number — Full name, date of birth, address, and appearance details can all be sourced via a drivers license.

Passport Number — Full name, date of birth, place of birth, and nationality details can all be sourced via a passport.

Email Address — Useful as a medium for phishing scams. Emails are easy to automate and easy to make look legitimate.

Residential Address —While exchanges are very digital places, access to a user's physical location places them at risk.

Important Considerations When Signing Up To A New Cryptocurrency Exchange

Liquidity — A highly liquid market facilitates buying and selling of cryptocurrencies within the reduced likelihood of price slippage when market buying or selling, due to a higher number of buyers and sellers. Low liquidity indicates a low number of buyers and sellers and a greater chance of price slippage when market buying or selling.

Security — Cryptocurrency exchanges are by far one of the biggest targets for cybercriminals. With literally billions and billions of dollars stolen from cryptocurrency exchanges in the last 5 years, it can be a huge gamble to store funds on an exchange for a long period of time.

Ideally, a cryptocurrency exchange would:

1. Utilize cold storage devices for the majority of their funds,

2. Make use of two-factor authentication, and

3. Email encryption and verification.

Currency Offerings — Exchanges with larger coin offerings tend to also be the exchanges that do not offer a Fiat currency on-ramp or off-ramp. This may be due to the fact that cryptocurrency exchanges with Fiat on and off-ramps are more likely to adhere to local government regulations, and by doing so are unable to accept the majority of alternative coins, aka altcoins, aka shitcoins.

Customer Support — Most newcomers will need assistance when it comes to the buying, selling and storage of cryptocurrencies. Whether it’s technical difficulties you need help with or just an explanation of a cryptocurrency concept, cryptocurrency exchange support staff should offer fast and effective customer service.

Fees — Low transaction fees are ideal. Fees tend to fluctuate from exchange to exchange. If you’re looking to save on cryptocurrency exchange fees, check out this article on 12 Cryptocurrency Exchanges That Can Save You Money While You Trade.

UX/UI — If a cryptocurrency exchange is not easy to use, you will likely move to an exchange that is. A cryptocurrency exchange should be easy to use. When on a cryptocurrency exchange, you should know what you are doing and why you are doing it, your funds should display in the currency of your choosing, and be transparent with information (but not data).

Final Thoughts

We’re not saying cryptocurrency exchanges are bad places, we’re just saying be wary of newer exchanges trying to lure you in with the promise of a free $10.

Take some time, do some research, and ask yourself: Do you really need to sign up to another exchange? What is on offer that isn’t available elsewhere?