The security of our customers is paramount for Coinmerce. That is why we do everything to make sure the funds of our customers are safe. Given the state of the cryptocurrency market after the fall of FTX, a lot of exchanges & financial platforms are being asked how they keep client funds safe; in this blog post, we want to showcase how we keep your funds secure.
In addition, we want to be transparent to our users!

Coins in custody are backed 1 to 1.

First, let‘s have a look at coins that are “in custody”. There are cryptocurrencies that are simply held in wallets on our platform, which are not being staked or have “Earn” enabled. To keep these funds safe, they are primarily kept in cold wallets. To ensure withdrawals from our platform happen smoothly, we do of course have to keep some funds in so-called hot wallets. Between 5% and 10% are kept in hot wallets to facilitate these withdrawals. This means at any time, 90% of these funds are kept in cold wallets.

How does Earn work on Coinmerce?

When Earn is enabled for a specific coin, the way it is stored changes. To give out the displayed rewards, Coinmerce uses these funds to generate returns. It is important to know, however, that Coinmerce does not lend these funds to DeFi protocols or parties like Genesis, FTX, Three Arrows Capital, BlockFi, or Voyager. The main reason is that lending to these parties would mean we lose sight and control over these funds.

Instead, Coinmerce uses strictly selected financial institutions to trade with these funds through Coinmerce-owned accounts on different exchanges. This way, Coinmerce stays in control over these funds, and will always have the possibility to return these funds to cold wallets. The key aspect of the Earn program is risk management, which is of the utmost importance to Coinmerce as this service provider.

So how does Coinmerce get these rewards? Coinmerce does not use risky trading strategies or dangerous leverage trading. We do use a company that does market making. The most important thing here is that Coinmerce always has full control and insight into the funds.

The result is that the rewards paid out to our customers by the Earn program are variable. When our risk management team concludes a big shift in any situation with regard to the safety of these funds, we may choose to disable Earn for a specific coin or stop the Earn program altogether.

Since we offer flexible earning, customers can stop lending out crypto at any moment. To prevent transferring numerous small transactions to and from the earn program, a little more could be allocated to the Earn program to ensure everyone can receive rewards right from the start when activating Earn. Adjusting the total amount held in Earn is automated and done daily.

Would you like to know more about the Earn program? Then check out the following link: https://coinmerce.io/en/earn-help/

How does staking work on Coinmerce?

For crypto that can be staked, the situation differs for each coin. Some coins can be staked from a cold wallet, while others may need to be in a hot wallet. Wherever possible, these coins remain in cold wallets. Also, staking is only possible for coins based on the so-called “Proof of Stake” principle. Would you like to know more about staking? Then check out the following link: https://coinmerce.io/en/staking-help/