Bitcoin has proven that it is built on strong grounds. Consider that it has been there for 12 years, while dozens of other cryptocurrencies have emerged since then. Ever since hackers and scammers have stolen cryptocurrencies worth huge sums from the exchanges.
While the crypto industry is booming on a regular basis, larger amounts of crypto necessitate greater accountability with a highly stronger security. This is true for both customized and white label crypto exchange. If cryptocurrency security in the space is not enhanced, the adoption of crypto will be limited since new people will be hesitant to use crypto. Nearly every single day, we get new updates regarding the breach of sensitive data or hacking of a crypto exchange.
The crypto exchange that was hacked was never a better deal. Not only are there more and more of them, but they also hold considerable amounts of money. Why wouldn’t someone want to make a fortune overnight just by discovering a security flaw in a crypto exchange?
For the time being, just be a little more serious. Cybercriminals have been in the industry since the internet’s inception. As a result, it is reasonable that they are active in the crypto market right now, where significant money is moving.
Cybercriminals have multiple possibilities for inserting harmful code into the crypto exchange or at least a portion of it. It might be anything having access to confidential data, for instance, any employee’s machine or could be the server.
What if you are getting your exchange built from the ground up or considering investing in a white label Bitcoin exchange solution? If you want to ensure the protection of your users’ assets, here are some cryptocurrency exchange security tips to follow.
Let’s take a look at our 8 strategies for securing a cryptocurrency exchange.
#1. Cold Wallets Storage
Coincheck, a Japanese crypto exchange, was hacked in 2018 and lost NEM coins worth over $534 million that were stored in a single hot wallet that lacked multisignature security.
If Coincheck used a hybrid of hot and cold wallets, it would never have happened, at least not on such a large scale. When all of a customer’s assets are housed in hot wallets, a hacking of the exchange system might put their money at risk.
While the blockchain is a completely transparent ecosystem, attackers may be able to see and monitor which wallets are used for hot and cold storage via on-chain analysis. To enhance the degree of crypto security, a customized or white label bitcoin exchange may use pre-cold and pre-hot wallets.
Since cold wallets are not directly linked with the internet, they should hold the majority of cryptocurrencies. Hot wallets act as a liquid deposit for exchanges, allowing clients to make large withdrawals.
A few exchanges, like KuCoin, have split the assets in the consumer interface as well. Cryptocurrencies can be held on either the Main Account or the Trading Account. While the Main Account is used for deposits and withdrawals, it is necessary to obtain those monies in a more liquid form, such as a hot wallet. The Trading Account is designated as a liquidity pool for crypto transactions and trading. Because crypto assets cannot be withdrawn until they are transferred from the Trading Account to the Main Account, an exchange does not need to keep them in hot storage while they are in the Trading Account.
#2. Authentication using two factor
Two-factor authentication is essential in the crypto business due to security concerns. Passwords remain intact until they are cracked. The users’ lack of experience in generating a strong password or the usage of the same password across many accounts leads to password breach. Because hackers have access to users’ credentials, they commonly employ strategies like keylogging which instals hazardous code on machines. Once a password has been stolen or found, the hacker waits for the ideal chance to use it.
At the time of signing in or drawing down the amount, multi-factor authentication provides an additional degree of protection beyond the password. Two-factor authentication might take the form of a text message or an e-mail. A common method is to use a particular mobile app for this service, such as Google Authenticator or Authy, which generates a unique cluster of digits within a defined time frame.
#3. The account associated with a given IP address
This security measure is not as widely employed as others, but it may be more restrictive for the cyber attacker as well. It is far more difficult to overcome a crypto exchange account after it has been linked to more than one or two IP addresses.
Tracking IP addresses that the user enters when logging into the exchange is utilized by the main exchanges, but exclusively for informational purposes to gather information about the user’s prior behaviour. However, this is delivered without any explicit warning – whether the consumer regulates his activity and sees any variations or strange events or not.
Meanwhile, the pioneer exchanges are starting to send users messages in the case of any suspicious activity in their accounts, such as access from a foreign country or a computer or browser other than the one the user normally allowed to reach the exchange.
#4. Message alert when the funds are dedited from the accounts
One other vital security precaution is notifying the account holder when payments are debited from the account. Along with the withdrawal alerts, they also give the deposit notifications. All this warns the account holders to become more cautious before something unfortunate happens.
A few exchanges go far beyond merely sending email withdrawal notices. Furthermore, they provide you the option of clicking the active button right in the body of the email, which may result in the transaction being annulled or even an account closure if any unusual or suspicious actions are detected on our account.
#5. Withdrawals are blocked after updating account information
Changing account data, such as related email addresses or phone numbers, is typical hacker behaviour. After gaining access to the account, the attacker must guarantee that any possible withdrawals may be authorised via his controlled phone or email.
Crypto exchanges prevent the types of malicious actions that hackers often participate in by blocking withdrawals for many days, if not a week or two, after altering some account settings. The hacked individual must be uninformed of the attack at least until the withdrawal is verified if the hack is to be effective.
#6. Presence of an anti-fraud unit
One of the company’s essential points is the anti-fraud section. The availability of such a section is quite beneficial, particularly for large corporations and white label crypto exchange, in terms of avoiding and identifying any misbehavior. All exchange personnel should be knowledgeable of fraud prevention and detection even before it occurs. One of the most crucial measures is to educate one’s own personnel.
A firm that has a dedicated section devoted to fraud detection, on the other hand, sends a significant message to its clients and shareholders. A warning that the firm takes the combat against scammers and hackers seriously.
#7. Funds for customer insurance
In general, there are 2 techniques for ensuring that monies are retained on the exchange. The first is given by a third-party insurance company, while the second is backed up by an internal policy or guideline. Because when assets are stolen or lost, exchanges must compensate their clients’ losses; otherwise, fines may result in the firm’s liquidation.
#8. Security audits of crypto exchange
The periodic security audits of the cryptocurrency exchanges are comparable to client insurance funds, providing two key services for the exchange operator. An audit may not only reveal security vulnerabilities in a customized or white label crypto exchange, but it also increases investor trust and legal certainty. To guarantee compliance with regulatory frameworks, many nations rely significantly on audits. Money laundering and fraud of any form should be limited in order to obtain greater confidence.
Multiple types of audits, but for crypto exchange-related businesses, System and Organization Control audits are the most crucial for crypto exchange-related organisations since they are used to objectively discover possible trading threats and inform customers that your organization has robust and efficient measures in place.
The white label crypto exchange firm may be extremely profitable, but security must come first. Inevitably, the risks overshadow the potential profit. A focused cyber attack on assets stored in bitcoin exchanges has the potential to transform everything.
Take into account the number of cryptocurrency exchanges that have been hacked in the past. Some of them, such as Mt.Gox, Cryptsy, Cryptopia, and BitGrail, no longer exist.
Hackers and fraudsters are always developing new tools and methods for getting access to exchange servers and user apps. Starting a bitcoin firm without a good cybersecurity policy in place is a major risk since something unexpected will happen sooner or later.
If you are planning to launch your crypto exchange, Antier Solutions can help you build a highly-secure exchange. Whether you need to build a custom exchange from scratch or a white label crypto exchange, we fortify each exchange with market-leading features to achieve institutional-grade security.
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