All Bitcoin Exchanges Lax on Security, Should Get Rid of Hot Wallets

During the past 6 years (from 2009 to 2015), one-third of all Bitcoin exchanges have been hacked. While this is less than the rate of security breaches experienced by stock exchanges, which is over half, it is still many times that of banks, who reported a 1% instance of data breach.
Bitcoin exchanges do implement certain measures to reduce the risk of hacks, such as partial cold storage and multisig wallets, but are they enough?
CoinTelegraph spoke with Robert Genito, CEO of Genitrust, on why Bitcoin exchanges are not doing their proper due diligence to ensure that customer funds are kept safe.
CoinTelegraph: What’s the difference between a hot and cold wallet?
Robert Genito: A hot wallet is generally a wallet where the private keys – even if they are one signature of many – are stored on a machine with an active connection to the internet.
CT: So a cold wallet is on a device with no internet, correct?
RG: Basically, yes. Preferably the wallet seed or private keys were generated on that “cold wallet” (or “cold storage”) machine. Furthermore, the machine never had and never will have an internet connection. The public seed or receiving Bitcoin addresses are exported from that machine and loaded onto the web application service.
CT: Is cold storage at all practical for transactions?

This post was published at Coin Telegraph on 2016-08-31.