Aug 28 · 4 min read
Don’t get me wrong, I love free money — but sometimes free money isn’t free. Sometimes the risks of free money can outweigh the rewards.
When a cryptocurrency exchange offers you free money — usually to the tune of $10 to $20 — you must consider whether it is worth both your time, and potential risks involved. Newer cryptocurrency exchanges requiring you to pass Know Your Customer (KYC) — which means giving up your drivers license or passport in order to prove your identity — tend to be the ones offering free money upon sign-up more often than not — so not the most trustworthy of sources.
It’s not to say newer cryptocurrency exchanges can’t be trusted, but they have had little time to demonstrate that they canbe trusted.
So, is giving up your passport or drivers license details — and even residential information — really worth $10?When you sign up to a cryptocurrency exchange — thanks to government regulations — you’re more than likely using a service with KYC checks in place that require certain documents to be provided to prove your identity due to Anti-Money Laundering (AML) and Counter Terrorism Funding (CTF) laws. This usually means uploading a copy of your passport or drivers license to the exchange platform, as well as some form of proof of address to prove to the regulators that you are a real person.
Some Personal Data You Provide That Can Be Used Against YouFull Name — “Name as it appears on card,” is a widely used security check for online purchases.Date of Birth — Commonly used during account creation, and often used to verify existing accounts.Drivers License Number — Full name, date of birth, address, and appearance details can all be sourced via a drivers license.Passport Number — Full name, date of birth, place of birth, and nationality details can all be sourced via a passport.Email Address — Useful as a medium for phishing scams. Emails are easy to automate and easy to make look legitimate.Residential Address —While exchanges are very digital places, access to a users physical location places them at risk.
Important Considerations When Signing Up To A New Cryptocurrency Exchange
Liquidity— A highly liquid market facilitates buying and selling of cryptocurrencies within reduced likelihood of price slippage when market buying or selling, due to a higher number of buyers and sellers. Low liquidity indicates a low number of buyers and sellers, and a greater chance of price slippage when market buying or selling.
Security— Cryptocurrency exchanges are by far one of the biggest targets for cyber criminals. With literally billions and billions of dollars stolen from cryptocurrency exchanges in the last 5 years, it can be a huge gamble to store funds on an exchange for a long period of time.
Ideally, a cryptocurrency exchange would:
1. Utilize cold storage devices for the majority of their funds,
2. Make use of two-factor authentication, and
3. Email encryption and verification.
Fees— Low transaction fees are ideal. Fees tend to fluctuate from exchange to exchange. If you’re looking to save on cryptocurrency exchange fees, check out this article on 12 Cryptocurrency Exchanges That Can Save You Money While You Trade.
UX/UI — If a cryptocurrency exchange is not easy to use, you will likely move to an exchange that is. A cryptocurrency exchange should be easy to use. When on a cryptocurrency exchange you should know what you are doing and why you are doing it, your funds should display in the currency of your choosing, and be transparent with information (but not data).
We’re not saying cryptocurrency exchanges are bad places, we’re just saying be weary of newer exchanges trying to lure you in with the promise of a free $10.
Take some time, do some research, and ask yourself: Do you really need to sign up to another exchange? What is on offer that isn’t available elsewhere?