I’m being asked this question a lot. And many newbies are shocked by the reply too.
Bitcoin is peer-to-peer currency. Storing your Bitcoin on exchanges like Binance, Coinbase, PayPal, etc, makes your money, as well as the whole Bitcoin ecosystem insecure indirectly by centralizing Bitcoin. One day there will be just a few enormous companies, holding most of Bitcoin for their members.
Bitcoin is a bearer asset with immutable txs unlike fiat. This means that thieves prefer to target what they can take and won’t be reversed like digital fiat. Having centralized exchanges and banks store Bitcoin makes it a desirable target for these attacks. Many attacks are also coming from the inside of the organization.
Keeping your Bitcoin in an exchange, you’re tempting exchanges to use fractional reserve banking and giving them too much influence. You are exposed to exit theft or get delayed payout of your Bitcoin just because someone in support won’t like your name, country you’re from or places you’re using your Bitcoin in to pay for good or services.
There are privacy concerns with storing your bitcoins with third parties. Many exchanges do KYC and can link and use/sell in the future all information gathered. They can also be hacked and leak all this info. You don’t want strangers to know your name, phone number, home address and how many Bitcoins you own. What if your government turn on you and decide to take all your Bitcoin? Can’t happen because you’re living in a free country? Ever heard of “Executive Order 6102”?
Executive Order 6102 is an executive order signed on April 5, 1933, by US President Franklin D. Roosevelt “forbidding the hoarding of gold coin, gold bullion, and gold certificates within the continental United States.” The executive order was made under the authority of the Trading with the Enemy Act of 1917, as amended by the Emergency Banking Act in March 1933.
Never store your bitcoins on an exchange. You own 0 Bitcoins if you do not control your private keys. Not your keys, not your Bitcoin.
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