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A large sum of trading money on cryptocurrency exchange software and anonymous trading have made cryptocurrency exchange platforms luring targets for attackers. Nearly 54% of cryptocurrency exchanges have security holes and more than US$ 1.7 billion worth of cryptocurrencies have been stolen by the hackers.
This calls into question existing security paradigm and the role of exchange owners to safeguard their users’ assets. However, rigorous implementation of right security can minimize attacks and lay a strong foundation for secure trading.
Essential security features that a cryptocurrency exchange should have
Secure cryptocurrency exchange results in a solid user base and high revenue. Underpin your exchange with the following features to enhance its security:
A registry lock provides an additional layer of security to cryptocurrency exchange software by locking the domain at the registry level. It essentially prevents hackers from making unauthorized changes or illicitly deleting crucial elements of your domain name including the registration details. A report by ICOrating.com states only 2% of exchange platforms use registry lock.
When you leverage the registry lock feature and initiate a request to make any changes to a domain, a three-way security passphrase check is performed between the domain registrant (you), the registrar (your service provider) and the registry. This helps achieve the highest level of domain security.
Domain Name System Security Extensions (DNSSEC)
DNSSEC is a set of protocols that authenticate all domain name system (DNS) queries. DNSSEC exploits the combination of public keys and digital signatures to validate the authenticity of data. It can reject illegitimate DNS entries and responses, preventing users from accessing fraudulent websites and being affected by malicious activities like pharming and cache poisoning.
Sign your domain with DNSSEC to secure certain kind of information provided by DNS. However, DNSSEC cannot provide data confidentiality or protection against distributed denial-of-service (DDoS) attacks.
DDoS attack involves overflowing a targeted server or network by flooding it with fake internet traffic to interrupt its normal functioning.
Of late, many cryptocurrency exchange software have been a victim of DDoS attacks which resulted in costly downtime losses. Bitfinex, one of the leading crypto exchange platforms had to suspend trading after a DDoS attack.
A practical way to prevent DDoS attacks is to configure exchange website’s firewall to drop incoming ICMP packets or block DNS responses from outside of the network. Additionally, you can leverage anti-DDoS hardware and software modules like load balancers and network firewalls.
Web Protocol Security
Lackluster web protocols are most vulnerable to cyber attacks. Implement the following security headers to make your exchange more secure than 29% of other exchange platforms lacking these headers.
A cold wallet is an offline, safe storage for crypto assets. Integration of a cold wallet into an exchange provides an additional layer of security. Even if an exchange is hacked, the assets stored in a cold wallet are invulnerable to theft.
Many cold wallets leverage advanced features such as biometric-enabled authentication and multi-signature authentication to accomplish the highest level of security. Linking your cryptocurrency exchange software to a cold wallet would mean providing multi-layer security to your platform users.
Given that cryptocurrency exchanges, especially the ones with high liquidity, have large crypto holdings worth millions of dollars, they are an appealing target for hackers. Implementing the right security features will help build a more secure cryptocurrency exchange ecosystem.
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