login credential details with bitcoin apps

[nick.bitcoiner]

Hello all,

I know there are many experts in bitcoin.

My question is simple there are many applications like coinbase, binance and so on. In order to buy bitcoin i need to create an account in one of these applications.
Now Assume i created an account with a particular user id and password now Once i login i can see my bitcoin wallet and the amount of bitcoins i have in my wallet.

Now assume that i buy some bitcoins for now assume 3-4 bitcoins. Now since the user id and password is present with the coinbase or biance (centralized server). They can easily sell my bitcoins from my wallet. And I know going to the law in Europe is expensive and time consuming task which i do not want to do.

Now my questions are.

1. Once i purchase bitcoins in my wallet these 3rd party applications like binance and coinbase can easily transfer your bitcoins to some other address as they have your user id and password stored in their centralized server using node or mysql. So what is the solution for this situation. can some one please explain?


Regards

[Poker Player]

You're worrying about something you shouldn't be worrying about. Are you worrying about the bank taking your money and sending it to someone else? Well, this is the same thing. Exchanges make more money and have fewer troubles running their business than trying to rip people off.

[nick.bitcoiner]

The problem is that these biance and other applications have your user id and password store on their server. And they know that we cannot go to the courts or law since it is expensive they can easily steal your bitcoin because they are big giants. And when you file a complain on them since they are so big they can show that you did legal transaction to some destination wallet address.

[dkbit98]

Once i purchase bitcoins in my wallet these 3rd party applications like binance and coinbase can easily transfer your bitcoins to some other address as they have your user id and password stored in their centralized server using node or mysql. So what is the solution for this situation. can some one please explain?

Those are called exchanges because you are using them for trading to buy, sell and exchange coins and they should not be used for holding and keeping your coins.
Not your keys, not your coins.

Solution for your problem is simple. After you buy on Binance or Coinbase, you download your own wallet like Electrum or Bluewallet and withdraw all coins from exchanges there.
Now you own your Bitcoin, so you better backup your seed words or private key in safe place.

[mk4]

As long as you're planning on using a legal and totally legitimate exchange, the likeliness of this happening is pretty pretty slim. But regardless, you shouldn't be leaving coins on exchanges in the first place. Get yourself a nice hardware wallet so you'd be able to have full control over your funds and you won't be fearing things such as this. https://notyourkeys.org/

[Yogee]

....So what is the solution for this situation. can some one please explain?

The only solution is avoiding the problem and I mean not using these centralized platforms. You are always at the mercy of these exchanges and you have no other choice but to put your trust that they won't mess with "your" bitcoins.

You can buy BTC on decentralized exchanges like Bisq and BlockDX if you don't want to worry about those things.

You're worrying about something you shouldn't be worrying about. Are you worrying about the bank taking your money and sending it to someone else? Well, this is the same thing. Exchanges make more money and have fewer troubles running their business than trying to rip people off.

He's not entirely wrong. Any centralized platform is capable of stealing their user funds. Haven't you heard of bank accounts emptied because of the their security lapses?

[webtricks]

Now assume that i buy some bitcoins for now assume 3-4 bitcoins. Now since the user id and password is present with the coinbase or biance (centralized server). They can easily sell my bitcoins from my wallet. And I know going to the law in Europe is expensive and time consuming task which i do not want to do.

The problem is that these biance and other applications have your user id and password store on their server. And they know that we cannot go to the courts or law since it is expensive they can easily steal your bitcoin because they are big giants. And when you file a complain on them since they are so big they can show that you did legal transaction to some destination wallet address.

An important point to understand here: When you buy bitcoins on such exchanges, there is no real transfer made to you. Just like your userid and password, your balance is also just a number stored in their centralized database. Take this example to understand the things better:

Suppose, Person A deposits 5 bitcoins on Binance. To do so, he will send bitcoins to the deposit address shown in his 'funds' section on Binance from his personal wallet. Once, Binance receive those bitcoins, they will update the balance of Person A in their database and balance will start reflecting on Person A's account. Now, Person A sells 4 bitcoins on Binance and Person B buys those. Binance will then update the balance of Person B to 4 and Person A to 1. Important point to note here, bitcoins are not really transferred from Person A to Person B. Bitcoins are still in custody of Binance, only user balance has been updated in centralized database of binance. Now, Person B has the authority to withdraw 4 bitcoins to his personal wallet. Person B can use non-custodial wallet and go to the withdraw section, place the withdrawal of 4 bitcoins. Once, the withdrawal is processed, Binance will update the balance of Person B to 0 and make real on-chain transaction to Person B's personal wallet.

So, the working of centralized exchanges work on trust basis. There are several instances in past when the exchanges ran away with users' funds. But like you are saying that they can make transaction to some destination address, they don't even need to do so. They already have access to your coins without needing userid, password or anything. These authentications are from user-prespective, site owner already take the custody of the coins the moment user makes the deposit.

[Charles-Tim]

1. Once i purchase bitcoins in my wallet these 3rd party applications like binance and coinbase can easily transfer your bitcoins to some other address as they have your user id and password stored in their centralized server using node or mysql. So what is the solution for this situation. can some one please explain?

In addition to what others have commented.

Do you have the private key to your funds on custodial exchanges? No, you do not even have any private key with them at all.

What is private key? Private key is used to unlock funds from bitcoin blockchain where bitcoin are stored.

Which means ones the bitcoin is transferred to custodial exchange from your noncustododial wallet, it means it is no longer yours on blockchain.

If the exchange is a scam exchange, they will run away with your bitcoin, no password or username needed, all needed is the private key, and of which they have it.

If the exchange is legit, they have the full control over your coins, they can block your account, they can freeze it or make other inconveniences like exchange under maintenance and inability to withdraw at the time.

Not you key not you coin.

[The Cryptovator]

Using a third-party centralized wallet or exchange means you are trusting them. Believe me, although that all wallets using SSL encryption but still they have access to your wallet. Their codes aren't open-source, which means they even could directly access your wallet if they want. No one could detect it except them.  Where is encryption, there is decryption as well. So, if you can't trust them then do not use their service. If you are forced to use their service to buy cryptocurrency then just move your funds into a noncustodial wallet. It's better to use a hardware wallet if you are dealing with a big amount.

[hulla]

If you want to use a centralized exchange site, make sure you go reputation exchange cause with that the chance of your coins getting stole by the exchange itself is narrow and exchange like Binance is good since they have SAFU but it not advisable to keep huge coin on an exchange though.

1. Once i purchase bitcoins in my wallet these 3rd party applications like binance and coinbase can easily transfer your bitcoins to some other address as they have your user id and password stored in their centralized server using node or mysql. So what is the solution for this situation. can some one please explain?

Which means ones the bitcoin is transferred to custodial exchange from your noncustododial wallet, it means it is no longer yours on blockchain.

The OP may misunderstand this.
@nick.bitcoiner, the coin is not in your control though you are the owner but technically it's automatic belong to the exchange site.

[Darker45]

As others have already pointed out, there's no reason why you will keep your Bitcoin in those sites. If you are saying you are only using such platforms for you to be able to purchase Bitcoin, as soon as you have them in your wallet withdraw them right away to a safer wallet which is controlled by no one else but you.

If, for example, you have yet to purchase a hardware wallet or choose the best open-source non-custodial wallet, activate 2FA. Use all available means to bolster your account's security.

You're worrying about something you shouldn't be worrying about. Are you worrying about the bank taking your money and sending it to someone else? Well, this is the same thing. Exchanges make more money and have fewer troubles running their business than trying to rip people off.

He/she is worrying something everybody should be worried about.