09.12.2021

Why the world’s largest cryptocurrency exchange regularly faces problems: expert answer

The popular American cryptocurrency exchange Binance recently found itself at the center of a major scandal – hundreds of its clients complained of hacked accounts and sudden loss of their funds.

It turns out that since 2016, Coinbase users have filed more than 11 thousand complaints against the company with the FTC and the US Consumer Financial Protection Bureau. Most of them are related to bad faith in the provision of services. So what is the real problem of the exchange?

By tradition, let’s start by explaining the situation. The day before, the network revealed the problem of the Coinbase cryptocurrency exchange. Many of its users, presumably through their own fault, lost money, and the technical support in response either declared their limited capabilities, or did not respond at all. In addition, some clients of the platform received account blocking – and also could not get through for help.

The situation with insufficiently effective technical support looks strange given the scale of the Coinbase exchange. We checked the current data: over the last day, the exchange ranks third in terms of trading volumes on the spot market, that is, transactions with crypto at market prices.

Above it are only Binance and Huobi platforms.

cryptocurrency trading volume

Top crypto exchanges by trading volume on the spot market

What’s wrong with cryptocurrency exchanges?

Bobby Zagotta, CEO of the American branch of Bitstamps, and Iqbal Gandham, vice president of Ledger, tried to answer this question in an interview with the news outlet Cointelegraph.

According to Zagotta, all the problems are due to the too rapid adoption of cryptocurrencies. Here is a quote from an expert in which he shares his vision of the situation.

Cryptocurrencies are experiencing massive growth – so fast that proper customer service is a challenge for all companies. Some of them approach customer service like technology companies. This means they use a variety of MVP products with automated customer service in the form of chatbots. What is missing is the human factor, that is, technical support operators.

Many crypto exchanges do face a shortage of operators. This is noticeable in the huge queue for receiving answers, which is on the trading platforms. Sometimes you really have to wait for a reaction for several days.

Coinbase cryptocurrency exchange

Coinbase User Growth

Gandhi said that Coinbase, despite its scale and reputation kriptobirzhi, which in April came to the IPO , is still the trading floor, and thus is not suitable for permanent storage of large amount of funds. According to him, Coinbase is just a springboard for newbies when entering the industry, after a while they should realize and accept the fact that keeping crypto in cold wallets is better and safer.

However, these words from the lips of Gandham sound like a veiled advertisement – nevertheless, he represents the most popular manufacturer of hardware cryptocurrency wallets, which essentially opposes itself to crypto-exchanges. Recall that the difference between hardware wallets like the familiar Ledger Nano S is the storage of private keys inside the device. Since they never leave the device and do not light up on the Internet, it is almost impossible to steal cryptocurrency from such devices, unlike exchanges.

The only exception may be the loss of a device with an accidentally disclosed PIN code. You can also lose funds in case of disclosure of a seed phrase – a unique combination of 12, 18 or 24 words, from which private keys are created. Usually, inexperienced users of cryptocurrencies fall for this trick, who themselves reveal important combinations to scammers under various pretexts. Let us remind you that it is by no means possible to disclose your mnemonic phrase to other people – this will end in an irretrievable loss of money.

But Zagotta suggested a sensible solution to the problem – to reduce the waiting time for a response from technical support. Moreover, each user should be served by a person, not a bot. Given the huge number of Coinbase customers who need help every day, the exchange will likely have to expand its staff significantly to cope with the demand for crypto assets from customers.

We believe that the problem with cryptocurrency exchanges is indeed due to the relative newness of the niche, which attracts a large number of beginners. They do not know the specifics of interacting with blockchain assets and therefore ask a lot of questions and

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