Traders expect and demand security measures be taken seriously by the crypto exchanges they trade on. But most platforms struggle to comply with even the most basic steps, like the implementation of secure passwords. As per research, more than 50% of platforms do lack proper security in at least one zone, making them and their customers vulnerable to cyber attackers.
To ensure that such risks and attacks are not widespread, the exchange owners need to provide a robust process to test and remove security flaws. This article will explore the most prevalent security flaws in crypto exchanges and the methods to fix them.
What are Security Flaws in Crypto Exchanges?
Here are the major security issues that make cryptocurrency users vulnerable to malicious attacks:
It is sometimes difficult to secure crypto platforms from phishing attacks even after using the most stringent security measures. Bitstamp (Bitcoin Exchange) became an unfortunate victim of cybercriminals who utilized phishing mechanisms to steal about 5 million dollars in 2015. Hackers sent a file via email that seemed to come from a valid source. When downloaded and installed on the target’s device, it ran a malicious code on the system.
Weak Hot Wallets Protection
Many crypto platforms use single secret keys to protect hot wallets. If an illegitimate individual gets his/her hands on that key, he/she would be able to gain control over the corresponding key’s hot wallet. Instances of such private key incidents involve attacks on Bitfinex and Parity. These malicious activities cost about $65 million to Bitfinex and $30 million to Parity. Cryptocurrency exchange sites may prevent these kinds of attacks by utilizing multi-signature secret keys – a small step you should not be skipping.
Banks and financial organizations are forced by different laws to enforce data safety policies to safeguard customer deposits and prevent fraudulent transactions. However, because Blockchain is still in its infancy, very few regulations apply to cryptocurrency exchanges. Thus it is no anomaly that most crypto platforms have weaknesses that enable attackers to steal large amounts of money.
Inadequate Security of Employee Login Credentials
By way of habit, workers employed in crypto platforms often use inadequate credentials or store their passwords less securely. This allows easy access to hackers for getting the login information. That is why online hackers make attempts to invade employee’s private credentials most often.
This raises the problem of information protection in businesses and workers’ ability to bring private and confidential data home. Consequently, companies have to ensure that workers keep their passwords related to all software programs secure – this not only applies to software installed on the staff’s official devices but also their personal computers.
Crypto platform’s proponents claim that these exchanges are extraordinarily safe since all transactions are registered on an immutable ledger. It should be acknowledged that all the payments have signatures that can be compromised before any transaction is closed.
For instance, the Mt. Gox attack was among the most publicized breaches in the history of crypto markets. It was carried out by cybercriminals who sent variations to the code to be placed on the public record before the initial payments were released. In the end, this cybercriminal attack cost a loss of more than $450 million.
Read Also: Top 5 Online Trading Apps in India 2020
Techniques to Fix Security Vulnerabilities in Cryptocurrency Platforms
Now that you have a clear understanding of the different security vulnerabilities in any crypto platform, let us look at some valuable techniques to ensure that your crypto exchange is safe from these known security breaches.
Make your Ecosystem Safe
It is exceedingly important to take due account of the database, server-side, and client-side technologies. SQL injections are prevalent and contribute to disturbing the Internet space as well as Blockchain. Likewise, suspicious snippets of Java and other open-source programming languages are yet another threat. The ultimate strategy to minimize all of this is to block unsafe third-party apps and code entirely.
Use an SSL Certificate
An SSL Certificate dramatically helps to build trust relationships with your consumers. Once it is enabled on a site means that the user’s data is encoded, secure, and the website is fully protected. Your clients are always conscious of cybersecurity and associated risks and an SSL certificate helps you get your exchange URL bar displaying the padlock sign to create user confidence.
For better protection of your crypto exchange platform and for higher authentication as well as a rigorous validation process, you must install an EV SSL certificate that could establish an identity over the web.
Blockchain is comparatively newer financial business software, and so it is for the clients, too. But still, individuals are becoming more and more involved and discovering more unique ways to join this platform.
Investors who trade in these cryptocurrencies are often not very familiar with crypto exchanges’ actual workings. This shortage of knowledge makes it hard for these platforms to protect their customers’ virtual resources.
Thus it is essential for crypto exchange networks to put additional efforts to educate investors and clients. This can be done by publishing informational material on your site, using social media platforms, distributing informative newsletters or security paperbacks, and more!
Use Two-Factor Authentication
The purpose of the two-factor authentication (2FA) for banks, as enforced by Payment Service Directive 2 (PDA2), is to offer an extra safety level. This guarantees an extra layer of protection, keeping attackers in check. The same technique can be introduced for the crypto platforms to avoid illegal transactions and to increase security
Go with the Cold Storage Approach
Cryptocurrencies kept in hot storage are typically prone to various cyberattacks. The other choice here is to store it in cold storage, generally hardware wallets such as Trezor. The drawback of cold storage is its high expense, but you should surely invest in cold storage wallets if you can spend on this.
Know Your Customers (KYC)
KYC is a series of guidelines that apply to crypto exchanges all over the world. Whether or not your cryptocurrency exchange platform is within the scope of necessary KYC regulations, it is still suggested to enforce it, mainly when malicious hackers actively use cryptocurrencies to collect money using ransomware.
Perform Pen Tests
It is crucial to check your ecosystem periodically and find the gaps. You can employ a professional (White Hacker) to conduct these penetration tests regularly, which will, in turn, help you to resolve these security problems and improve the protection of your crypto exchange platform.
Security concerns are critical for all crypto exchange platforms. In the development stages of an exchange application, protection often gets less attention, with so many other things to be taken care of at a higher priority. This makes these platforms vulnerable to cyberattacks.
Explicit knowledge about the various types of security flaws in crypto exchanges and their solutions, as discussed above, will surely help you make your crypto exchange platform secure from all the known security threats.