Hackers have infiltrated digital technologies ever since the internet started, and they will certainly not stop now. Thus, crypto exchange security is becoming even more critical as more users enter the crypto space.
Blockchains and crypto exchanges can be exposed to human error, allowing hackers to exploit network bugs, and not only. History has shown that even the biggest exchanges can be hacked, losing millions in user funds. Here are some common ways how crypto exchanges can increase their security level.
Crypto exchanges can prevent a larger financial hit by using cold wallet storage. Cold wallets don't connect to the internet directly, and the private keys are stored offline. If tokens are stored in hot wallets, users' assets are at greater risk during a network attack. Crypto exchanges can use hot wallets for active trading but keep most of the tokens on cold wallets in the main account.
Two-factor authentication is a must in every digital interaction, including crypto. Passwords can be easily cracked by installing malware on a user's computer or forced cracked because of a poorly set up password. Exchanges can implement an additional layer through a text message or via phone or e-mail. Alternatively, they can use the popular Google Authenticator app that generates a random number.
Notifying users about asset withdrawals keeps users in the loop about their exchange and fund activities. Crypto exchanges can implement multiple notification e-mails to inform users about different types of activities, including logins, deposits, withdrawals. Additionally, exchanges can add a quick link to report or block the account if they recognize any suspicious activities.
Blocking withdrawals after personal data changes on the exchange prevents hackers from obtaining complete control over one's exchange and funds. Hackers need to change personal data, specifically e-mails and phone numbers, to approve any withdrawals and not trigger a security alert. Exchanges should implement a withdrawal ban for one or two weeks after personal data has been modified.
If users lose money after a hack, exchanges have to reimburse their users; otherwise, they will face governmental consequences. Exchanges should insure their funds either through an external insurance policy or create an in-house rule to assign a percentage of transaction fees to a special dedicated fund that operates as a fail-safe.
Exchanges have to be ahead of the hacking game and always improve their cybersecurity systems because hackers never rest. Investing in a guarded system will pay dividends in the long term because it keeps millions in funds safe from bad actors and preserves your business integrity.
#cryptocurrency
#blockchain
#bitcoin
