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A cryptocurrency exchange is an online platform where users buy, sell or trade cryptocurrencies. Exchanges have two major things to handle – users’ funds and users’ data. The privacy and security of both should be ensured by every exchange platform.
Given a large amount of users’ funds stored on a cryptocurrency exchange, it is a luring target for cybercriminals. The number of cryptocurrency exchange hacks got doubled in 2018 –recording 6 incidents of security hacks compared to 3 in 2017. Furthermore, the amount of crypto assets being hacked got multiplied by 13 times, according to a report by Coindesk. Besides, over 7 crypto exchange hacks have been reported so far in 2019, the most severe being Binance attack, which resulted in a loss of $40 million worth of Bitcoins.
All these incidents lead to an indispensable need for multi-layer security to mitigate security risks associated with an exchange.
If you are planning to build your crypto exchange, whether from ground zero or simply white label cryptocurrency exchange software, make sure to reinforce it with the right security features to allay the chances of security hacks.
How to mitigate the security risks of your crypto exchange?
Integrating the following features into your cryptocurrency exchange can help you enhance the security of exchange while limiting the vulnerabilities associated with it.
Two-factor authentication, also referred to as 2FA, is a two-step verification process or dual-factor authentication. It requires users to prove their identity by inserting credentials which they receive on different channels – on their registered email address and phone. This ensures authenticated access to a user account on a cryptocurrency exchange. Two-factor authentication is better than single-factor authentication as the former provides an additional layer of security. Integrate your white label cryptocurrency exchange software with 2FA to enhance its security.
KYC (Know Your Customer) is a process to verify the user’s identity and address. This helps ensure legitimate access to an exchange while warding off any illegal intentions of hackers. Ensure to have a geography-based KYC verification process in place to reinforce the security of your cryptocurrency exchange.
Integration of cold wallet
Cold wallets are offline wallets that are not connected to the internet and store private keys offline, thus making them less vulnerable to hacking and unauthorized access of hackers. Although a crypto exchange is integrated with a hot wallet, it pays off to link a cold wallet to an exchange. This provides an additional layer of security to a crypto exchange while allowing the users to trade with confidence. Users can keep the crypto assets that they want to trade in the hot wallet and transfer the rest of their assets to a cold wallet, keeping their cryptocurrencies out of the reach of hackers.
SSL (Secure Sockets Layer) is a security protocol that develops a secure channel between two operating machines over the internet. SSL protocol is typically used to secure and encrypt the message. For any white label cryptocurrency exchange software or a non-white label exchange, anonymity and security are the main concerns. Make sure to run all of your website traffic over encrypted SSL (https).
Cookies validate the identity of users as they browse from page to page. Underpinning your crypto exchange with cookies will help you recognize the IP address of the device from which your users log in. If a user logs in from a new device, he/she will be prompted to authorize the device before being able to gain access to an account. This helps ensure authorized user access to your crypto exchange.
Security is of the utmost importance when building a cryptocurrency exchange. Secure white label cryptocurrency exchange software is not only able to build credibility but also acquires more number of users. So, fortify your exchange with the right security features, and of course the features that contribute to world-class user experience, to gain an essential competitive edge.
If you are new to the cryptocurrency development world, you can always seek the assistance of an experienced cryptocurrency exchange development company. A reliable company can guide you throughout the development process – from choosing the right technology to the right security features, and more – steering your development journey towards success.
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