I have a friend who's new to crypto and he has all his coins in exchange. He feels they are safe there. "Why do I even need a wallet for anyway?!"
In this CryptoEducation post I'll try to persuaded you NOT to do as my friend.
There are two main arguments against keeping coins in exchange:
- You don't own the private keys of your wallets
- Most are unregulated and uninsured.
But the first and most important idea for me is that some people think, for reasons that are beyond me, that exchanges can act like wallet. I hear them say shit like this all the time: Oh, I just keep them on Polo!
Or, for new people just buying a shinny new cryptocoin for the first time, they go "Can't I just leave it in kraken?"
SHORT ANSWER: NO!!
Let's look at a definition:
exchange:
A marketplace in which cryptocurrencies are traded. The core function of an exchange is to ensure fair and orderly trading, as well as efficient dissemination of price information.
The first conclusion is that if you don't trade, you have no business leaving anything in there. Most of my noob friends do not trade, or at least, should not trade[ but that's for another rant!].
The second conclusion is does anyone else sees the irony of centralized exchanges for a decentralized economy? I mean...
Anyway, back to our reasons.
If you don't own the keys of an wallet, do you really own the key in there? One could argue that sure you do, the exchnge is obligated to give you the coins when you ask for them. Sure, but obligated by whom?
I mean, in banks, you don't want the keys to the bank yet you feel that the money are YOURS and SAFE. Maybe people tend to think the same about crypto exchanges...But the truth is that the banks are very regulated and insured and there are practices [ good and bad] that have been in place to prevent people or institution from stealing or losing your money.
So, you see why point #2 is incredibly important and changes everything: These exchanges are not regulated and have no government or laws overseeing their activity. In a way, they only work because people use them and trust them. But there's literally nothing and no one- and I repeat, NOTHING! - stopping them from saying "Tough luck, your coins are now mine!".
Will they do that?
Probably not, they make too much from the fees to kill the goose but if they wanted to, they could and that's scary enough for me.
But even if your exchange is trustworthy to extreme( hmm, what's that exactly?! ) they are still at risk to be hacked. Remember all the hack from the past?
It's not SUCH a distant past.
Sure, exchange learned their lessons and the coins are safer than they used to be and everyone is doing well. But if something DOES happen and your coins are lost, then what? Will you trustworthy exchange refund the losses? You better hope so because those coins are surely not insured!
As a side note, this does not mean I think exchanges are evil. I think the future of crypto-exchanges is decentralized, with everyone owning their own keys, like ethdelta but better ui. And the fact that it's a wild west out there it's what makes this market so insane, unexpected and dear to us all, right?
When you go to the Wild West you take risks but why take more than you need to?
Bottom line is that exchanges are fishy and have no compelling reason to have your best interest at heart :) Remember that next time you think it's safe to keep important coins there.
Now, there are exceptions. There should not be, but if you have a lot of shitcoins ( sorry, I meant ALTS! ) you can't download 100 wallets for each of them, especially when you have too little to matter. Well ok, but if they are shitcoins why did you even buy?
Imho, btc, eth and eth-tokens and Steem are too easy to store privately not to do it.
In case you don't know - your Steemit account IS your wallet and very secure at that, especially if you keep it in saving account. For btc and eth you can use Jaxx which is very very pretty and so easy to use. Or you can get a variety of other wallets that are out there and really, easy to use ( looking at you, myethwallet ).
Oh, and please don't download or log in browser wallet from LINKS, even if these re MY links and you can trust me. Always check you are on the right page :)
But let's say you are a cowboy! You don't give a FUAK! You don't care for the warnings! WHO AM I TO TELL YOU WHAT TO DO?!
fair point.
Then at least, please, at least! Put 2 factor authentification on all your exchange accounts. It takes literally a second.
In crypto, 2fa is simply common sense.
[Which remind me that we need 2fa on Steemit! 
Did my friend listen?
Noup. But at least he has 2fa now.
Be smart, sleep better and when/if the news of another hacked exchange hits your wall, you won't have a sudden heart attack.
And that's how this post saved a life.
You're welcome :P
As always, leave any comments in the questions and be safe out there!