Cryptocurrency exchanges have witnessed huge growth in the digital era. They are trading money worth billions of dollars each day. More than 5000 different cryptocurrencies are circulating in today’s market. Many companies have accepted the fact that starting a cryptocurrency exchange is a valid business model. Some of the popular exchanges functioning now are Binance, Bitfinex, Poloniex, and Kraken.
Since they are the custodians of the data and funds of millions of users, exchange owners must focus on enhancing their security measures to protect themselves from hacking and phishing attacks. Many centralized exchanges have been hacked in the past and funds have been swindled away from investors without any chances of recovery. One of the high-profile hacks was the Mt.Gox attack in 2014 where a whopping 850,000 Bitcoins were stolen which eventually led to the exchange becoming bankrupt in the future.
Certain steps that crypto exchanges can take to fortify their security includes the adoption of measures like two-factor authentication, SSL encryption, firewall implementation, transport security, password-protected user access, and a captcha. This will minimize the risks of social engineering.
Frequent penetration checks can be done to figure out the vulnerabilities in the exchange as no platform is 100% foolproof. The most common types of attacks on crypto exchanges are social engineering (phishing), DDoS attacks, and injecting malicious code through malware.
You can also organize a bounty program where exciting rewards such as tokens and coins will be distributed to those people who find bugs and security loopholes in your cryptocurrency exchange software.
Acquiring a high-quality white label solution is beneficial not just in terms of cutting costs and time but it also comes free from bugs ensuring no interference with the basic functionalities. It will come in a customized manner once you disclose your business requirements to a well-versed white label solution provider.
Some of the modern security measures that can be undertaken are
- The usage of private keys to operate an account and storing it securely in the wallet. It can come with features like multi-factor authentication and auto-rejection of duplicate payments to prevent fraud. Users should also be given the option to store their private key completely disconnected from the online world. Also, never share your private key with anyone.
- Having a mix of hot and cold wallets will help in the diversification of funds to avoid risks. One wallet can be used for conducting daily transactions while the remaining money can be kept in a separate wallet. While the hot wallet will be directly connected to the online exchanges for allowing scaled transactions, the cold wallet will operate offline and not participate in real-time trading. Even if an exchange is hacked, the assets or funds stored in the cold wallet are not vulnerable to theft. Many cold wallets use supreme security measures like biometric-enabled authentication and multi-signature authentication.
- A desktop wallet can be opted for which functions like a cold storage facility not connected to the Internet and the private keys will be stored only on your machine.
- Firms operating in the cryptocurrency space can invest in a registry lock where the domain will be locked preventing hackers from making unauthorized changes such as modifying the registration details. The highest level of domain security is achieved as a three-way security passphrase check will be imposed between the domain registrant, the registrar, and the registry. However, only a mere 2% of all exchanges use registry lock facilities currently.
- Domain Name System Security Extensions (DNSSEC) will help in authenticating all the domain name system (DNS) queries. It uses an effective combination of public keys and digital signatures to validate the authenticity of the data. Illegitimate DNS entries will be immediately rejected. Users will be prevented from accessing fraudulent websites and will not be affected by malicious activities such as pharming and cache poisoning. However, DNSSEC cannot ensure data confidentiality and protect the exchange against DDoS attacks.
- Anti-DDoS modules can be set up to prevent downtime losses. An exchange website’s firewall can drop incoming ICMP packets or block DNS responses from outside of the network.
- A variety of tools can be installed for ensuring a high level of Web protocol security. It includes HTTP Strict Transport Security, a Content security policy, X-Frame-Options for safeguarding against clickjacking attacks, and X-XXX-protection for preventing cross-site scripting attacks.
- Simple steps such as using a secure internet connection and avoiding using public-WiFi networks can be taken. A VPN (Virtual Private Network) can be utilized for additional security as it keeps your browsing activity safe from threat actors.
- Install strong anti-virus software and firewall in the device that you are using, be it a PC, laptop, smartphone or tablet, to avoid the entry of hackers.
- Change your password frequently and avoid using the same password on multiple devices and accounts. Ensure that you have a strong and complex password with a mix of characters making it difficult to guess. In case you have multiple wallets, use separate wallets.
- Avoid clicking any suspicious or unknown links received via malicious ads or emails as it could be a phishing scam. Many crypto companies in the US and Japan have been targeted by spear-phishing campaigns. These attacks were carried out by impersonating affiliated organizations and employees using fake domains and malicious links were sent in documents via emails.
The crypto industry is constantly evolving day by day. Update yourself with the latest security trends and practices to protect your digital funds with essential safety precautions.
Comments here are not of the author's opinion. Users are responsible for their comments.