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What is the most bad thing that can happen?
First of all, the exchange never loses money. House always wins. And customers always lose. Users are happy when BTC goes to the moon, hoping they'll earn some profits. They get sad then BTC value crashes, because they lose money. Many sell their BTC although they know they are losing, but they do it in order to avoid to lose even more. They don't understand that as long as they keep their BTC they don't lose anything. And what do the exchanges do? They win when BTC soars, as they earn fees from the users. They earn when BTC value goes down, as they are receiving fees now as well. When the users withdraw their money from the exchange, they lose more money. And I'm not talking about the network fees, but the exchange's fees.
In other words, people constantly contribute to the benefit of exchanges and also to their very own poverty. Besides, how many of you observed how the biggest exchanges, like Coinbase or Binance,
always encounter "technical outages", shutting down their platforms right at the moment when BTC soars to the moon or plunges? Can it be such a coincidence that at each substantial price change, an outage shuts down the exchanges only until the price comes back to its previous value? The explanations given by the exchanges' spokepersons are pathetic and ridiculous. It's vivid clear that, since these shitty moves are made for years, the exchanges choose to shut down in such moments, thus people won't profit if BTC soars too much and limiting them to buy BTC if the price plunges.
Second of all, as I was saying above, people lose their personal information by going willingly through a very dangerous process, named KYC. The exchanges don't care about their clients nor about their personal information. They only want to earn more money. They can be hacked by hackers which, besides stealing money, also steal the users' personal information, this being a very precious resource, which can be turned into even more money, especially when it is sold on Dark Net. A CNBC article describes how the hackers sell personal information for 1$ a piece (this information consisting, among others, in physical addresses of the users, their credit / debit cards, copies of their IDs etc.):
Hackers are selling your data on the ‘dark web’... for only $1. A notorious similar case from the forum is
the case of the Romanian bekli23, which, while pretending he is decrypting old BTC wallets, he was also asking users to send him photos with them while holding their IDs and other bills in hand. Obviously, he was not decrypting any wallet. But he was trying to collect personal information, most likely, for selling it on Dark Net, for the ridiculous price of 1$ per piece!
In some cases, the exchanges are the ones selling customers' personal information! And I'm not talking about small, shady exchanges, but about the big ones. Coinbase is one of the biggest exchanges and yet it was caught selling clients' personal data! A 2019 article,
Coinbase Admits Its Former Data Provider Sold Client Data, describes how Christine Sandler, one of the exchange's executives, admitted the company sold the users' personal information. Having this example, do you think that other exchanges don't do the same thing? Just they weren't caught yet?
Third of all, exchanges offer users' personal information directly to the authorities. Were you hoping the govern wouldn't know about you and your finances - at least your crypto transactions (considering that it knows anyway all your transactions with fiat money)? By using centralized exchanges, it is certain that the govern will have its eye on you! Again, an example involving Coinbase: a Forbes article,
Coinbase Notifies Customers That It Will Turn Over Court-Ordered Data, describes how this exchange gave the customers' private information to IRS. Don't imagine it was
a singular case. Such practices are done by all exchanges, no matter the country.
Fourth of all, a centralized exchange doesn't offer the private keys to the clients, meaning the users don't have access to the tool allowing them to control their own money. The private keys of the wallets are held by the exchanges, thus
the users accept they are ceasing the right of ownership over their money when they make deposits to exchanges. Regarding this situation, the Bitcoin evangelist Andreas Antonopulos used the expression "
Not Your Keys, Not Your Bitcoin". For making things even more clear, in a lawsuit against Coinbase (this exchange seems to be the most negative example), the accuser lost the trial and the judge decided
Not Your Keys, Not Your Bitcoin.
Fifth of all, exchanges can be hacked by hackers (
and you lose the money).
Sixth of all, exchanges can decide abusively to freeze your accounts (
and you lose the money).
Seventh of all, exchanges can exit scam (
and you lose the money).
This is why you should avoid centralized exchanges. This is why Bitcoin must not be used together with such monsters, which are working just to the prejudice of the clients! This is how the clients of centralized exchanges lose their money no matter the operation they intend to do. And this is how, besides money, they also lose their personal information, risking to have it stolen by bad actors, fact which exposes them to monumental risks: once the criminals obtain someone's personal information, they can pay him a "visit", they can rob him, they can break into his house, they can steal his goods or even they can threaten his life!
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