Explain Cryptocurrency Exchanges:
Trading on cryptocurrency exchange is the most typical method for buying and selling cryptocurrencies and other digital assets. Privately managed platforms known as cryptocurrency exchange make trading one cryptocurrency for another and digital, fiat, and NFT currencies possible.
Before the advent of cryptocurrency exchange, users could only purchase cryptocurrency by mining or by making transactions in offline and online teams. Today, hundreds of cryptocurrency platforms offer a huge selection of crypto assets, security features, and transaction fees.
How are Cryptocurrency Exchanges Kept Secure?
If you’re developing your exchange from inception or considering purchasing a white-label Bitcoin exchange decision. Therefore, the cryptocurrency exchange is the safest method to safeguard your users’ assets.
Find out our security measures for a cryptocurrency exchange.
- Cold Wallets Storage:
Here is an example to explain what occurred with the hacked account and how to resolve their problem. During the Coincheck hack in 2018, a Japanese cryptocurrency exchange lost NEM coins worth over $534 million that were kept in a single hot wallet without multi-signature protection.
It would never have occurred if Coincheck had used a hybrid of hot and cold wallets. If a hacker obtains access to the exchange system while a customer’s assets are stored in hot wallets, their money may be at risk.
Although the blockchain is open, the on-chain analysis may allow attackers to determine which wallets are used for hot and cold storage. A customised or white-label crypto exchange may use pre-cold and pre-hot accounts to increase crypto security.
Cold wallets should store most coins because they aren’t internet-connected. For exchanges, hot wallets serve as a liquid deposit from which exchange users can primarily withdraw.
- Authentication using two factors:
Due to security concerns, two-factor verification is crucial in the crypto industry. As long as they are not determined, passwords are secure. Password flows are caused by users’ inexperience in creating secure passwords or using the same password for multiple accounts. Because they have access to user credentials, hackers frequently use keylogging techniques to install harmful code on computers.
Multi-factor authentication offers additional security beyond passwords when checking in or withdrawing money. Email or SMS messages can be used for two-factor authentication. A popular technique is using a specific mobile app for this service, like Google Authenticator, which creates a distinct cluster of digits within a set amount of time.
- A linked account with a given IP address:
Although this security measure is less frequently used than others, it might also be more difficult for online attackers. Once a crypto exchange account has been connected to more than one or two IP addresses, removing those connections is much more difficult.
The main exchanges track the IP addresses that users enter when logging in, but only for informational reasons to compile data on the user’s previous behaviour.
The developed exchanges begin to notify users when their accounts exhibit suspicious behaviour, such as access from a foreign nation or use of a computer or browser other than the one the user typically authorises to access the exchange.
- Message alert while funds are debited on accounts:
Another essential security measure is notifying the account user when money is debited. They send deposit notices in addition to withdrawal notifications. This serves as a warning to the account users to exercise greater caution before something terrible happens.
Some transactions require much more than just emailing withdrawal notices. Furthermore, they allow you to cancel a transaction by selecting the active button immediately in the email’s body. If any strange or suspect behaviour is found on our account, this might result in account closure.
- After updating account details, withdrawals are blocked:
It’s usual hacker behaviour to change account information, such as associated email addresses or phone numbers. After getting access to the account, the attacker must ensure that any potential withdrawals can be authorised using his controlled phone or email.
Crypto exchanges block withdrawals after altering some account settings to stop the malicious activity that hackers frequently participate in.
- Presence of an Anti-fraud Unit:
The anti-fraud section is one of the company’s key aspects. In terms of avoiding and identifying any misbehaviour, the availability of such a section is quite advantageous, especially for big corporations and white-label crypto exchanges. Every exchange employee should be knowledgeable about fraud detection and avoidance.
However, a company with a section specifically dedicated to fraud detection expresses a strong statement to its clients and shareholders. This serves as a reminder that the company takes the fight against hackers and criminals seriously.
- Funds for Customer Insurance:
There are usually two techniques for ensuring that funds are kept in the trade. The first is provided by a third-party insurance provider, whereas the second is supported by an internal policy or guideline. Exchanges must cover their customers’ losses when assets are stolen or lost; otherwise, fines may force the company’s liquidation.
- Security audits of crypto exchange:
Comparable to client insurance funds, the periodic security audits of crypto exchanges offer two crucial services to the exchange operator. A white-label or customised crypto exchange may have security faults that can be found through an assessment, which would also boost investor confidence and legal certainty. Many countries depend heavily on audits to ensure conformance to regulatory frameworks. To promote greater trust, money laundering and fraud should be halted.
There are many different audit types, but System and Organization Control audits are crucial for companies working with cryptocurrency exchange because they objectively identify possible trading threats and reassure customers that your business has effective safeguards.
Although the white-label crypto exchange company may succeed, security must come first. Naturally, the risks outweigh the possible rewards. Everything could alter if there were a targeted cyberattack on the assets kept in Bitcoin exchanges.
If you want your business more growing, too, Rain Infotech Private Limited provides the best cryptocurrency exchange development service in the whole world. With the skilled developer teams offering the best service and helping out with the development service. Also, we are one of the leading blockchain development company amongst the many companies.