One-Third of Crypto Exchanges Offer Margin Trading, only 4% Offer Insurance

CryptoCompare’s Exchange Benchmark report shows that one-third of cryptocurrency exchanges are now offering margin trading options to their users, while only 4% offer some form of insurance.

In a press release shared with CryptoGlobe, the firm revealed that in an updated version of its Exchange Benchmark it found that out of 160 active spot cryptocurrency exchanges, 33% were giving their users margin trading option.

As CryptoGlobe reported 3% of cryptocurrency exchanges were hacked last year, while only 4% offer some form of insurance. The figures are concerning as this means some of the exchange offering margin trading may not have systems in place to protect their traders in cases of extreme volatility.

Cases in which cryptocurrency exchanges had to socialize losses because of flash crashes aren’t rare. In July 2019, Poloniex had to distribute the losses of botched margin trading of the CLAM altcoin among margin holders and lenders. Poloniex claimed only 0.4% of its users were affected and started working to reimburse users.

Nevertheless, traders threatened to sue the cryptocurrency exchange. If the same were to happen on another exchange offering margin lending, the platform could end up shutting down. Instead of getting a 16% haircut like they did on Poloniex, users could lose all of their funds.

CryptoCompare’s report even found that 6% of cryptocurrency exchanges failed to score an ‘A’ on its web security test.

exchanges' web security testSource: CryptoCompare

Out of the over 160 spot exchanges analyzed, 16% stated they hold over 95% of their cryptocurrency in cold wallets. 9% reportedly use the services of a custody provider to store cryptoassets.

CryptoCompare’s Exchange Benchmark ranks the lowest risk cryptocurrency exchanges by assigning them a grade. In its updated release, U.S. and Japanese regulated exchange itBit ranked number one, followed by Gemini, Coinbase, Kraken, and Bitstamp.

Featured image via Pixabay.

Error in Time-Locked Bitcoin Contracts Allows for Miner 'Fee-Sniping'

Michael LaVere
  • Crypto researcher 0xb10c discovered an error in bitcoin "time-locked" transactions that could be used as an attack vector.
  • Miners can take advantage of the program to carry out "fee-sniping" and steal funds from one another. 

Users have discovered an error in bitcoin “timelocked” contracts that could potentially allow miners to steal BTC from one another. 

Anonymous crypto engineer 0xb10c reported discovering more than one million “time-locked” transactions made between September 2019 and March 2020. In a post, 0xb10c detailed how these special bitcoin transactions were not being accurately enforced by the network. 

As opposed to normal transactions, time-locked transactions prevent recipient bitcoin from being accessed after sending. Users must wait for a specific number of blocks to be added to the network in ten-minute intervals before gaining control of their bitcoin. 

0xb10c claimed the errant time-locked transactions provided an attack vector for miners to steal transaction fees  from one another via “fee-sniping.” According to the engineer, the backlog of time-locked transactions were being purposefully designed for a “potentially disruptive mining strategy” involving the theft of miner fees. 

In an interview with CoinDesk, 0xb10c said time-locked transactions represented a “low-priority” problem at present that could eventually balloon to involve the wider network. He explained that fee-sniping would become more lucrative in a few years as the majority of miner income shifts towards transaction fees. 

He continued, 

A fix for this has been released in early 2020. However, it will take a while before all instances of the currently deployed software are upgraded.

Featured Image Credit: Photo via Pixabay.com