If you want to ensure the highest level of protection for both your own assets and those of your customers, it is in everyone’s best interest to adhere to the security best practices outlined in this article.
Check out the top 8 techniques to keep your best crypto exchange safe!
If all the customers’ assets are kept in hot wallets, then the server of the exchange could be hacked, which would put those customers’ holdings at risk.
Although the blockchain is a totally transparent area, it is possible for adversaries to monitor and track, using on-chain analysis, which wallets act as hot storage and which wallets serve as cold storage. In addition, pre-cold and pre-hot wallets might be used by exchanges to further bolster the degree of crypto security.
Since cold wallets are not directly linked to the internet, they should store the bulk of a user’s cryptocurrency holdings. Hot wallets provide an exchange with a liquid deposit that enables the exchange to process sweeping withdrawal requests from customers.
Additionally, several exchanges have partitioned the consumer interface to isolate the various assets. Users can hold bitcoins on either their main account or trading account. While the main account is used for making deposits and withdrawals, it is vital to receive that money in a form that is more liquid, such as a hot wallet.
The Trading Account is designed to function as a liquidity pool for cryptocurrency transactions and trading. It is possible that the cryptocurrency assets will not be removed from the Trading Account until they are placed into the Main Account. Because of this, an exchange does not need to keep the cryptocurrency assets in hot storage while they are in the trading account.
Authentication Using Two Separate Factors
For obvious reasons related to safety, the crypto sector absolutely requires the use of two-factor authentication. Some deals include more than two variables; in fact, some of them involve three or even more. Passwords are impenetrable until and unless someone figures out how to break them.
It might be the user’s fault for using a password that is too easy to guess, or for using the same password for many accounts. Hackers often make use of tactics such as keylogging or sending out spyware that installs harmful programs on computers so that they may obtain users’ passwords and get access to their accounts.
When an attacker has the password, whether they stole it or discovered it, the next step is for them to wait for the right opportunity to utilize it to their advantage. When entering an online account or withdrawing money, multifactor authentication adds an additional layer of protection on top of the password.
Either an e-mail or a text message received on a mobile device may serve as the second part of a two-factor authentication process. It is necessary to use multifactor authentication, since it just adds another layer of protection against the manipulation of your precious crypto assets. This makes the usage of multifactor authentication an absolute necessity.
An Account Tied to An Internet Protocol Address
Although this security measure is not as common as others, it nonetheless has the potential to restrict the activities of the attacker. As soon as the account on the cryptocurrency exchange is connected to one or more IP addresses, it becomes far more difficult to beat it.
The main exchanges do monitor the IP addresses of users when they log into the exchange; however, this practice is solely done for informational purposes to gather user information about the user’s prior behavior. But without any formal notification, this is offered entirely at the discretion of the client, who is solely responsible for controlling his conduct and keeping an eye out for any fluctuations or unusual occurrences.
There are, however, a few crypto exchanges that have begun to notify users via a message if their accounts have been accessed in an unusual manner. This could have occurred, for instance, from a location that the user is unfamiliar with geographically, from a computer or browser that the user does not typically use to access the exchange, or from any number of other possibilities.
Message Alerts When Funds Are Taken Out
Notifying a user that they are withdrawing money is another crucial step in maintaining their safety. When the hacker attempts to transfer crypto assets at the address that he controls, this action might alert the account holder exactly at the proper moment. Not only do the main exchanges provide alerts for cryptocurrency withdrawals, but they also do so for cryptocurrency stock inputs. It teaches consumers to be cautious if anything improper takes place.
Some markets provide a great deal more than simple email notifications whenever monies are withdrawn. They offer to make it possible for you to click on the active button right inside the body of the email, which has the potential to result in the cancellation of this transaction or even the suspension of our account if there are any unknown or suspicious movements on our account.
Halt Withdrawals Following Data Change on the Account
A hacker’s common tactics include altering account information such as email addresses and phone numbers. He must be certain that he can authorize any prospective withdrawal from the account through his phone or email if he has access to the account. ‘
When hackers modify account settings, crypto exchanges prevent this kind of criminal conduct by temporarily prohibiting withdrawals for a few days or perhaps a week or two. To ensure a successful assault, the hacked individual must remain unaware of the attack at least until the withdrawal is confirmed.
The Anti-Fraud Unit Exists
It is essential that the company’s anti-fraud section be well-staffed. Large organizations and cryptocurrency exchanges benefit greatly from the establishment of such a division, since it helps prevent and identify any misconduct. Everyone in the exchange should be informed of how to avoid fraud before it occurs. One of the most crucial stages is to educate your own employees.
The fact that a firm has a dedicated fraud-detection department is a powerful marketing tool for the company’s customers and shareholders. This sends the impression that the firm takes the fight against fraud and theft very seriously.
Insurance Premiums Paid by Customers
There are two methods to insure funds on the exchange. There are two ways to secure them: one is via an outside insurance firm, and the other is through an internal policy or rule. To prevent their operations from being jeopardized, exchanges must pay for the losses of their clients in the event of a theft or other loss.
Crypto Exchange Audits for Security
Like client protection funds, regular cryptocurrency exchange security audits have two key functions for exchange businesses. It’s not simply that an audit may expose security flaws in a cryptocurrency exchange, but it can also increase investor confidence and legal clarity.
To ensure compliance with legal requirements. More confidence may be gained by reducing the room for money laundering and fraud of all types. Due to previously hacked exchanges and their negligent attitude, security audits have become more important.
The Bottom Line
Even though the cryptocurrency exchange industry might be very lucrative, the security solution must take precedence. As a result, the dangers outweigh the potential profits. A single, well-targeted cyberattack on bitcoin exchange money may have disastrous results.
New methods of gaining access to the servers of exchanges and user apps are constantly being developed by criminals and hackers alike. To be fair, they have a legitimate reason for doing so: your coins. The exchanges are like honeypots to them, with millions of dollars’ worth of crypto assets are held there.
If you don’t have an efficient cybersecurity approach in place when you start a crypto organization, you run the danger of something unexpected and unpleasant happening at any moment. Like a game of fire, you may easily be burnt in this.
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