What if you want to invest in a white-label Bitcoin exchange solution or are having your exchange developed from the ground up? Here are some security recommendations for cryptocurrency exchanges that you should go by if you want to guarantee the safety of your users' assets.
Crypto audit companies do whatever they can to make the financial world more secure by auditing the smart contracts. These are the five methods for securing a cryptocurrency exchange.
#1. Cold Wallets Storage
BitMart, LCX, and Deribit are some crypto exchanges hacked and lost millions of dollars to different hot wallet security exploits. Recently, Deribit lost $28M.
Cold wallets should store most bitcoins because they are not immediately connected to the internet. Hot wallets allow users to make sizable withdrawals by serving as a liquid deposits for exchanges.
Some exchanges, like KuCoin, have also divided the assets in the user interface. Either the Main Account or the Trading Account can be used to hold cryptocurrency. It is required to obtain those funds in a more liquid form, such as a hot wallet, even while the Main Account is utilized for deposits and withdrawals.
The Trading Account is intended to serve as a liquidity pool for trading and cryptocurrency transactions. An exchange does not need to store cryptocurrency assets in hot storage while they are in the Trading Account since withdrawals cannot be made until they are moved from the Trading Account to the Main Account.
#2. Two-factor authentication
Users must be aware of the importance of creating a strong password. Within the crypto space, two-factor authentication is a must. When signing in or drawing down the amount, multi-factor authentication gives an additional degree of safety beyond the password.
Two-factor authentication could take the form of a text message or an e-mail. Using a specific mobile app for this service, like Google Authenticator or Authy, which creates a distinct cluster of numbers within a predetermined time range, is a frequent technique.
#3. Message alerts after the deduction of funds from the account
It is one of the most common and viral security precautions in which the users get alert messages after the amount gets debited from their bank account. Together with this, users also get deposit notifications. Naturally, the account holders will get cautious before something unfortunate happens.
A few exchanges involve far more than just sending email withdrawal notifications. Furthermore, they offer you the chance to cancel the transaction by hitting the active button directly in the email's body. This could lead to account closure if any suspicious activity is discovered on our account.
While this is going on, the pioneer exchanges are beginning to notify users when there is any questionable activity occurring in their accounts, such as access from a foreign nation or the use of a different computer or browser than the one the user typically authorizes to access the exchange.
#4. Blocking the withdrawals after the account information is updated
Hackers frequently alter account information, such as associated email addresses or phone numbers. The attacker must ensure that any potential withdrawals may be approved via his controlled phone or email after acquiring access to the account.
Crypto exchanges stop the types of criminal activity that hackers frequently engage in by delaying withdrawals after changing some account settings for several days, if not a week or two. If the hack is to be successful, the victim must be unaware of the attack, at least until the withdrawal is verified.
#5. Crypto audits of exchanges
To ensure the safety of the crypto exchanges, carrying out their security audits is a must. The process helps in identifying security vulnerabilities and also help in gaining the trust of the investors and legal certainty.
There are many different audit kinds. System and Organization Control audits are the most important for firms associated with cryptocurrency exchanges. This is because they are used to unbiasedly uncover potential trade hazards and reassure clients that your company has adequate safeguards.
These are the 5 ways with the help of which you can secure your crypto exchange. If you want your crypto security to get to the next level, then, these ways will help you do it.