Cryptocurrency exchanges have been affected severely by security-related issues in the past. The way of dealing in transactions is completely different from the traditional financial system. Hence, it is important to safeguard a trader’s funds and data from hackers by relying on secure wallets which can either be in the form of centralized storage or an offline hardware wallet storage. A higher level of security will increase the trust of traders in the system. A proper certification after extensive audits would be required from an approved authority.
Understanding the meaning of Cryptocurrency exchange security standard
It refers to a set of procedures, protocols, and certification strategies that defines the standards to be achieved during the process of cryptocurrency exchange development. Hence, extensive tests in the form of cybersecurity, penetration, user security, and other measures. The exchange would be determined with certain criteria after analyzing the final results.
Hacken is the first cybersecurity assessment ecosystem that has announced security standards to be followed by cryptocurrency exchanges all over the world.
The Cryptocurrency Exchange Security Standard proposed by Hacken
It has announced a portal named CER.live where cryptocurrency exchanges would be ranked by their respective cybersecurity rating. They will evaluate the security standard by analyzing the transactional security mechanisms, and the user security protocols through a penetration test. The ultimate aim of the Cryptocurrency Exchange Security standard is to prevent traders from interacting with those exchanges that do not have much concern over the safety and security of user’s investments. There will be an extensive security verification process that involves a Cyber Security score check, a Penetration assessment, checking the proof of funds, and going through the soundness of the Bug Bounty programs.
Let us examine Hacken’s ranking methodology concerning Cryptocurrency exchange security standards in detail
Cybersecurity Score Check - It will be assessed extensively by a combination of factors such as server security, user security, crowdsourced security, and the history of cybersecurity incidents. By calculating the scores of all these above factors, a comprehensive cybersecurity score will be provided for a cryptocurrency exchange. Certain key attributes such as the referrer-policy, transport security, content security policy, X-Frame options, X-Content-type options, and Feature Policy would be evaluated. The security for cookies, protection for the database against spam, enabling of two-factor authentication facility for users, a strong password policy, anti-phishing protection, device management, and a bug bounty program should be maintained. Based on the above-mentioned factors, a cybersecurity score check would be conducted and assessed.
Penetration test - It is very helpful to identify the exploitable vulnerabilities present in a system. Every exchange that adds new features periodically or goes through an operational update, must undergo a penetration test mandatorily. Only those cryptocurrency exchanges that successfully pass the penetration test would ensure the privacy of the user’s data and protect the funds safely.
Proof of Funds - It is a test taken to identify the insolvent exchanges present in the market. This normally occurs when a user attempts to withdraw more money from his account than the exchange can hold. Hence, every cryptocurrency exchange should disclose all the identifiable wallets, and the wallet addresses that it holds in the network. It would be eligible for the Proof of Funds test only if it possesses a minimum wallet balance of $1 million.
Bug Bounty - Every cryptocurrency exchange must undergo a bug bounty program that would be conducted by an external crowdsource security provider. It would help the owner of the exchange to find out bugs in the software and configuration errors that were not noticed by the developers and the security team in the past. Having an own bounty program can limit potential hackers to attack an exchange’s customer base.
Any cryptocurrency exchange in the industry that passes all the above four tests, would be ranked stars ranging from 1 to 3. Hence, all the metrics mentioned should be followed during the process of cryptocurrency exchange development. Ths security standards that have been set make crypto wallets become more resilient against chances of compromise. Whenever a cryptocurrency exchange is being developed through various stages, it must go through the next level only if the beta project has fulfilled certain criteria on each development and integration phase.
Every exchange that has suffered from a high-profile breach is found to have not complied with the above-mentioned Cryptocurrency exchange security standards. Testing for security standards regularly will provide a reasonable degree of assurance that the associated risks related to the management of the user’s crypto wallets are being minimized and mitigated. Security is invariably an important consideration especially when it comes to the execution of financial transactions. Money stolen from cryptocurrency wallets is not usually recoverable. Hence, exchanges must provide the necessary confidence that cryptocurrency wallets are managed by certain well-defined controls that meet industry-specific guidelines. Any cryptocurrency exchange that overlooks the security aspect would lose a lot of users which will ultimately affect its operations.
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