Exchange wallets – an opportunity or a risk for the user?

Every beginner in the crypto world faces the dilemma of choosing the right wallet for their cryptocurrencies. Which wallet is safe? Which is easy to use? One element often excludes the other. That is why it is worth taking some time to analyze and make a deliberate decision. After all it is our money that is at stake!

How does a crypto wallet work?

The purpose of a cryptocurrency wallets is to store funds and access the blockchain on which all transactions made in the network are saved. By setting up a crypto wallet we are granted access to it through a private key that is used for transferring funds. Remember! Do not give your private key to a third party since, following the rule ‘Not your keys, not your coins,‘ you can lose access to your cryptocurrencies!

With the creation of your wallet, you also get a public key which is used for receiving payments. You can use this key in a safe manner because it does not give access to your wallet in any way.

Types of crypto wallets

We can distinguish a few basic types of wallets: paper wallets, hardware wallets, software wallets and exchange wallets.

Paper wallets

With regard to security, paper wallets or brain wallets appear to be the best option. Simply speaking, they require creating a wallet with the use of a program by generating a private key to be printed out or saved in the form of special key words. Such a wallet can be created via a Github repository, where you can obtain a wallet-generating script. Electrum, Armory, or Mycelium are also examples of paper wallets. Apart from security, the advantages of such wallets include seamless receipt of payments and the fact that the fees are network dependent (i.e. they are dependent on network load, not on the exchange). However, the element that could cause frustration is the difficulty in transferring funds and operating the wallet itself. Besides, there is no possibility to get your money back in case you lose your private key and there is no option to change the transmission network.

Hardware wallets

The next type of wallets, much more convenient in use, is the hardware wallet. Ledger and Trezor, which outrun each other in making their wallets easier for their users to operate, are the most popular ones in this category. It is worth noting that the private key stays in the hands of its owner. Such a wallet is saved on a device that resembles a bigger pendrive and is usually connected to the computer through a USB slot. Equipped with a special chip, it gives you access to the blockchain and protects your private key against being accessed. You connect it to your computer only for the time it takes to confirm the transaction, thanks to which your funds are not available to hackers. A stolen or lost wallet is retrievable thanks to key words, which can be stored on pieces of paper kept in different parts of your house or which can be memorized. Apart from security and retrievability when lost, the advantages of such wallets also include easier use and the fact that the fees are network dependent. There are, however, some drawbacks. You need to have the wallet with you to confirm any transaction and if you lose the device and the key words, there is no option to get your funds back. Moreover, by using such a wallet you partially entrust the safety of your cryptocurrencies to its creators and you also do not have the option to change the transmission network.

Software wallets

The above types of wallets are called ‘cold wallets’, which means such wallets which store the user’s funds offline. Their counterparts are called ‘hot wallets’, so such types of wallets which have access to the network, e.g. Metamask, MyEtherWallet, Exodus. Private keys are secured by the device the wallet was installed on (e.g. a laptop, a smart phone), hence there is a greater risk that your cryptocurrencies will be accessed by hackers. Nonetheless, the user-friendliness of these types of wallets is much higher when compared to the ones mentioned before. Moreover, you can secure your money with hardware wallets (in the form of a pendrive), e.g. integrate Ledger with Metamask. It will make using and viewing your wallet easier and you would only need to use the hardware wallet to confirm the transaction when you wish to send some money. Similarly to the other ones, an additional advantage of software wallets is the fact that the fees are network dependent. However, the dangers are also worth mentioning. Their safety depends among other things on you as the user. If you lose the device or the key words, you will not get your money back. There is no option to change the transmission network.

Exchange wallets

Exchange wallets have a bad reputation and are considered to be the least secure. The irony is that up till now all banking institutions are such types of central hubs managing wallets of fiat money of all citizens and yet we continue entrusting them with our money. Of course, it is the question of regulations and trust. Nonetheless, as far as centralized solutions are concerned, it is not much different. Apart from their centralized nature, the reluctance towards exchange wallets may also result from some past events – hacker attacks, bankruptcy of some exchanges, frauds, thefts, unlawful management of user capital.  The fees, which are usually higher in exchanges than in case of transmission between wallets are an additional disadvantage (this results from the mechanism of charging fees by a given network, as on average the exchange has to pay the same amount it would pay for three transactions in the network). 

Apart from a number of risks related to keeping funds in the exchange there are also many advantages. An exchange wallet is generated when you set up an account in the exchange. Thanks to this, you can deposit and withdraw funds between accounts quickly and without any problems.  Such wallets are easy to use thanks to a user-friendly interface. You do not need to have any device near you to be able to deposit or withdraw cryptocurrencies. You can protect your funds by setting a complicated password to your account and additionally enable two-factor authentication.

Unfortunately, the private keys will not be yours, which means that the funds deposited in such wallets somewhat do not belong to you. Technically speaking, it has its benefits. The responsibility for the security of our private keys rests on someone more experienced (as we assume), we have the option to get our account back if we lose our password and some exchanges (including Kanga Exchange) allow for internal transfers that are free or bear a microscopic charge. Transmitting cryptocurrencies between networks is an additional benefit. What does it mean? Ethereum that is transmitted via the ERC20 network is not the same Ethereum that is transmitted via BSC. When you have an ETH in your hardware wallet in the ERC20 network, you will not be able to transfer it to BSC. It is, however, possible to do it in an exchange (if the exchange supports the given networks).

The biggest advantage of keeping your cryptocurrencies in the exchange is the possibility to multiply your capital. For example, thanks to the Proof of Stake mechanism Kanga Exchange offers a 7-18% profit per annum! The KNG, oPLN, or oUSD tokens, are subject to this mechanism and each of them represents a different kind of capital multiplication. To make it easier to understand, let us look at the oPLN (omega PLN) stablecoin. In order to make profit on Polish zlotys, the purchasing power of which decreases while they are kept in the form of bank deposits, you should transfer it the exchange and deposit to a special ‘PoS liquidity oPLN’ account. The current profit increases to about 11% per annum, while the bonus is paid out on daily basis. Where does the bonus come from? Kanga Exchange has the widest network of partner cryptocurrency exchange offices in Poland. To enable such a big network to have liquidity in operating cash, it uses the PLN funds ‘frozen’ by the users in their PoS accounts, multiplying their capital in return. What about security? Sławek Zawadzki, Kanga’s CEO, declared that they do not use the Kanga users’ money. He believes such practices to be highly immoral. He ensures that the funds will stay untouched by Kanga team thanks to the application of adequate internal procedures, which guarantee that no individual can decide about it on their own.  Hackers? Imagine combining the first of the above-mentioned wallets, which would be used as part of the security measures in managing the exchange. It is a successful way to secure against breaking into the users’ online accounts and accessing the money deposited therein. In view of the above, we could safely assume that in the case of some exchanges the security measures are at such a high level that there are no reasons to be worrying about losing the funds deposited in the exchange.

The choice of the type of wallet is not an easy task, especially for those cryptocurrency holders who are still beginners. On the one hand, we care about the security of the cryptocurrencies that will be kept there and the friendliness of using the system. On the other hand, we wish not to be thinking about the passwords or private keys. We do not like the fact that a centralized entity (a cryptocurrency exchange) keeps our funds, but simultaneously we are happy when it helps us get the access to our account back after we lose it. How can we find the golden mean? Analyze the nature of each type of wallets and decide on using a few options, diversifying the risks in the same way.

Roman Majewski for Kanga Exchange

Kanga Pay – web3 payment gateway for your web2 business

The crypto asset industry has struggled with the problem of their practical application for everyday purchases since its inception. Mainly, the functionality of cryptocurrencies orbited around market speculation and sending funds to another person (e.g. staying abroad) so that they could convert the digital currency into fiat.

For this reason, for a long time it was possible to get the impression that even bitcoin or ethereum would not be characterized by financial acceptability, allowing for the usual purchase of a meal in a restaurant. In addition, there is the problem of portability, i.e. complications regarding the time needed to obtain the right number of confirmations in the blockchain. Even enthusiasts of the technology realize that people are more likely to use fiat currency continuously than to opt for the crypto alternative.

Kanga Exchange is aware of these adversities, and has prepared a remedy in the form of a web3 payment gateway called Kanga Pay. It allows you to accept payments in specific trading pairs and automatically convert it to the one acceptable by the seller. In addition, the entire process takes place immediately. The gateway can be implemented by any web2 business, thanks to which it will expand its group to consumers who want to pay for their orders using cryptocurrencies.

People interested in implementing this tool can visit the https://apidoc.kanga.exchange/#post-/api/markets panel, where they will find API documentation with all the necessary data. Access requests must be made through your Kanga Exchange account. The request to activate the payment gateway can be processed up to 5 business days. It works on the same principle as the BLIK mobile payment system.

The client generates a 6-digit code in the application or on the web version. Then he has 2 minutes to make the payment, exceeding this time will result in cancellation of the process, which will then require the generation of another code.

At the same time, in connection with the introduction of the gate, Kanga Exchange is starting an ambassador program.

For more information about the payment gate and ambassador program, please contact us at [email protected]

We encourage you to join the group of people facilitating the adoption of cryptocurrencies in everyday life!

#KangaCard contest – Spoil Yourself

We’ve got another CONTEST with great prizes for you! 🤩

📜 Answer the question: >> How do you spoil yourself with Kanga card? <<

Maybe you have recently paid with Kanga card for a massage? Or for a stay in an exclusive hotel? Or have you bought a delicious cake? 😌

…Maybe you have some ideas on how you would like to spoil yourself in the near future? – If yes, this contest is also for you!

🛠️ Post the answer to the contest question on your social media channels with two hashtags: #KangaCard and #SpoilYourself

Your answer can be a text / a picture / your own unique image / etc. 😉 Just be creative and persuasive – THIS is what we will consider when selecting the winners 🎨

🏆:
1. PLACE – KNG tokens with an approximate value of $100
2. PLACE – KNG tokens with an approximate value of $60
3. PLACE – KNG tokens with an approximate value of $40
The total value of the prizes is $200!

📆 📝 Publish your answer(s) until May 24, midnight (CET)
📆 🎊 We will announce the list of the winners on May 25.

What if you don’t have your Kanga card yet? 🤷 💳
Don’t worry, you can get it for free after joining the Kanga Club

Does buying bitcoin support criminal activities?

In this article we focus on cryptocurrencies and money laundering issue. With digital assets, such as cryptocurrencies the process is similar, but with some advantages for safety side. Digital goods based on blockchain technology are traceable and accessible. Not only law forces
or regulators can follow the flow, also independent organizations or private companies use AI and algorithms to follow all large transactions. 

Buying bitcoin and money laundering.
How it works?

Let’s get through money laundering technique we know from first article of this series and place it in cryptocurrency realms:

Placement: illicit cash can be transferred into crypto via OTC offices or placed onto blockchain directly with the use of bitcoin ATMs. These actions need corrupted entities at OTC offices or large number of money mules. Another case would be crypto assets acquired by theft
or a scam. Here criminals are already in possession of crypto asset. 

Layering:  once acquired illicit virtual assets will be sent to various wallets, through exchanges and mixers dedicated to profit from staking
or other investments. Once mixed they are redistributed to clients and cycle closes with integration. 

But is it really so obvious and easy to process?

Almost every digital asset is traceable basing on major rule of blockchain: trustlessness. There are exceptions like private coins, which leave no trace behind or are programmed to delete transaction data without hurting blockchain functionality, but these are in minority. Besides private coins are in conflict with law makers and recently are being delisted from centralized exchanges.

So if everything is the same with traditional cash laundering why is it different?

In general the use of cryptocurrency as part of criminal schemes is increasing. However, the overall number and value of cryptocurrency transactions related to criminal activities still represent only a limited share of the criminal economy when compared to cash and other forms of transactions. 

In 2021 $8,6 billion was laundered via cryptocurrency. Annual record on that procedure appeared in 2019 with almost $11 billion. Amount seems big, but comparing this to data from first part of the article on world’s total amount of money laundered, it’s a small fraction: 

11 billion out of 715 billion gives 1,5%. Counting maximum laundered value of 1,8 trillion per year, the ratio falls to 0,93% . So less than 1%
of all illicit funds were laundered via cryptocurrency. 

Why criminals are not so keen to use crypto
in their money laundering activities?

Because cryptocurrencies are not anonymous. Every single transaction is logged onto the blockchain, which is a ledger of all transactions distributed to all users in the network. Most blockchains are publicly available, making transactions traceable. This gives law enforcement access to more information. While privacy coins and a number of services and techniques may hinder law enforcement investigations, it does by no means stop law enforcement from finding out who is hiding behind the crime.

Moreover the investigations in crypto is different to traditional way of investigating money laundering. Once a criminal will decide to use cryptocurrencies to legalize their assets from criminal activity, there are few advantages for investigators in crypto world. First is real time action. Exchanges and other DeFi businesses use blockchain analytic tools and AI to track suspicious actions in their organizations. In this way they can prevent or even stop ongoing process. Investigation can be launched just after first signs of suspicious activity. Comparing it to traditional banking investigations that are conducted months after the actions took place, when the money is redistributed and hard to trace. Crypto companies also share information in much more efficient way as they’re not bounded with personal information protecting laws. This comes from nature of blockchain itself as there is no personal information behind private keys and wallets’ numbers. Without knowing
a personal data, algorithms can follow suspicious moves and patterns and put a red flag on it quickly. Last but not least is liaison with law enforcement. Cryptocurrency organizations once they detect fraud or money laundering patterns they quickly send it to authorities so law enforcement can act in real world and put charges and arrests on suspects.

Despite a common opinion that crypto assets are great solution for criminals for money laundering, the facts and statistics state otherwise. Only 1% of all laundered money used crypto as a tool. The blockchain technology itself supports safety and gives advantages for law enforcement. 

Of course it is and probably will be used in financial crimes, as criminals always look for new ways to run their activities, but it is very unfair
to state that blockchain is criminal tool. Like with knife or atom technology, it can be used in good or bad way, depending on intentions.

Aleksander Sucharda
for Kanga Exchange

Common people in global scam. How our recklessness supports terrorism.

In previous article we learned about mechanisms of money laundering and terrorism financing. Now let’s have a closer look at us, common people, in this procedure. We watch news about terror attacks or about illicit deals between criminals
and politicians. Everything seems so far away. But is it? It appears not. We are closer than we may think and each
and every one of us should feel some responsibility on actions we take while investing or just transferring our money into global system. The message is clear: people are robbed so these funds can be used in illegal actions and terror acts. That’s why we should look at this issue not only from a perspective of safety of our assets, but also from wider perspective,
of global safety and order in financial systems. Yes, it is equal to keep our money safe with keeping the whole world safe.
Too dramatic? Maybe, but this article is to underline and point little weaknesses that have huge influence on how our world looks like.

Scams and frauds are targeted on banks and institutions, but these have strong security and procedures to keep attacks away. Unfortunately most of people do not follow so strict rules, when we speak about private safety. Furthermore, let’s be honest, people are greedy. They put aside their welfare, when promised with unbelievable profits. They trade their safety against big gains. This is a space for criminals to step in. Youtube and other social platforms are full of „golden deals”.
Does this sounds familiar:  „You send us 1 coin we give you 2! Oh, no wait! We give you 6, why not!” It is our responsibility
to logically examine such offers! Just think for a while, where is the deal? Why somebody is giving away money for free?
Is it really free? What are the risks? Some will say it’s not a big risk: to gamble 1 to get 6, but it is not true. By this you support criminal and terrorist activities! You become responsible!

When we think about criminal activities we imagine that all these people are acting willingly and consciously. Money mules that put cash in banks are always associates and work in the network. It isn’t true. Cyber criminals have become more creative with their methods on recruiting money mules. They often trick innocent victims into laundering money on their behalf with the promise of easy money by using seemingly legitimate job adverts and business offers via social media, online posts and direct contact. Many money mule recruitment efforts focus on individuals, especially young adults including those seeking to fund their education or adults recently out of work, who are likely to jump at the chance to apparently easily earn extra cash.

To stay safe we encourage you to think clearly and logically. There are no golden deals, these are scams! Carefully get into cooperation, that promise amazing profits for little amount of work. Talk about it with your friends and family. React when you see that somebody from your surroundings is getting into some unreal deal. Ask questions, challenge and tell them what you already know. 

Now you have solid knowledge of money laundering mechanism and how innocent people are engaged in these actions.
In next episode we will explain how blockchain technology can be used in financial crimes and we will challenge opinion
that it is supportive to money laundering schemes. 

Learn more about the security rules in this article.

Aleksander Sucharda
for Kanga Exchange

Money laundering and terrorist financing. Is blockchain a remedy?

The balance between freedom of individual and safety of mass transactions is critical issue in times of global business and international money transfers. Specially in new, undiscovered  and unregulated areas which crypto and DeFi businesses are. Obvious question is who
is running the deals and what are the intentions. Should all transactions be regulated? On all levels and in all areas of goods and services exchange? In general the regulations are to protect common people from fraud and to keep safety and order in financial systems. So maybe from a level of giving a friend some 100 euro back we don’t need much regulations and should keep freedom here? On the other end there are large scale transactions that are connected to people trafficking, drug trafficking, weapon sales and terrorism financing. Should we preach on freedoms from that perspective as well?

The most important is to keep safe our own and our families’ assets. On how to stay warned and how to protect our self we will write
in subsequent episodes of the series of articles. At the beginning let’s focus on some basics… 

What is money laundering and how financing of terrorism works? 

Money Laundering is part of economic crime. Next to internet scams, tax frauds and cyber-attacks. All these actions are gaining popularity among criminals and terrorists because of low risk and high profits ratio. The chance that fraud will be detected and prosecuted is very low because of complexity of the investigations. These need to be conducted with the participation of international forces, often under different jurisdictions. Money laundering is a crime in itself, but it often comes as a result and is closely related with other forms of criminal activity
as well as the financing of terrorism. The scale of this procedure is hard to estimate. Europol and United Nations Office on Drugs and Crime (UNODC) speak about number between 2 and 5% of global GDP that is laundered each year. This is between EUR 715 billion and 1,8 trillion that licks out of monetary system. Basically it is stolen from law-abiding citizens, whole countries and nations. In whatever way criminals got
to possession of illegal funds, they want to legalize it and put it into circulation.

There are three main steps of this procedure:

  1. Placement: placing the money in financial institution is crucial for criminals and terrorists. This operation requires wide net of associates: money mules, shell companies and sometimes insiders in banks and other institutions.
  2. Layering and mixing: after illicit funds got into monetary system the money laundering technics aim to hide the origins of it and conceal subsequent moves. It is reached by transferring this money into many accounts, belonging to many people and companies in various countries. Often it is sent to countries which do not require banks to report on their transactions (so called „underground banks”). Money flows into and out of this systems after many layers of transactions, so it is hard to connect original suspects with final beneficiary. 
  3. Integration: once the origins of illicit money was obscured, it is used to purchase other assets such as arts, high end goods, legal businesses and real estate. Things that are hard to follow and seem legit.

What is the terrorism financing?

Financing of terrorism is a process by which terrorists are funding their operations in order to perform terrorist acts. It is not necessarily connected with the money laundering. It is actually wider process that includes funding from both illegal and legal sources. Sources of funds may vary and come from different origins. Starting with occupation of whole territories, when economies are drained on behalf of terrorism ideology (controlling local banks and taxation, taking over oil and gas fields, robbery of economical assets). Through smaller scale activities like pirating, kidnaping, drug and people trafficking. Finally ending on not so obvious ways like extortion of agricultural goods or art crafts
and through donations to non-profit organizations. Sadly the last method is quite common and is based on humans good reflexes. The need
of help is instant and often stronger than need of careful checking the organization. Often it is cash based, so it involves kind of money laundering in its basics.

All of these wicked deeds have major impact on our lives and whole economies. We should be conscious about that and try to keep our funds safe, basically not to support criminal and terrorist activities. Let’s get through actions of the authorities and official defense system.

What institutions and regulations are aimed to prevent money laundering (AML)?

Thankfully we are not alone in this fight. Many institutions and organizations stand on guard and fight back money crime. One of the major is Financial Action Task Force (FATF) founded in 1989 on the initiative of G7. This intergovernmental organization develops policies to combat money laundering and terrorism financing. To achieve global implementation of their recommendations FATF cooperates with strong net
of FATF-style regional bodies. In Europe it is MONEYVAL, a permanent monitoring mechanism of the Council of Europe. There is no particular AML guideline. AML refers to all laws, regulations and procedures intended to prevent criminals from disguising illicit funds as legitimate income. It is set of recommendations that is a base for local legal solutions. On this basis local laws and acts are passed and implemented.

In next episode we will write about us, common people, and how we often without being aware take part in this procedure.

Aleksander Sucharda
for Kanga Exchange