How to secure a cryptocurrency exchange
Bitcoin and other cryptocurrencies are now mainstream. Everyone from Elon Musk to hedge fund managers is talking about it. But what about security? How do you secure a cryptocurrency exchange?
Bitcoin has been around for more than a decade, but (unless you consider the $20k peak a few years ago) it really didn’t take off until the onset of the pandemic. Today, cryptocurrencies are the rage, with just about everyone trying to get their piece of the pie.
When it comes to security, there’s plenty of information out there about securing crypto wallets. But what about crypto exchanges?
How do leading cryptocurrency exchanges like Coinbase, Binance, and Kraken ensure privacy and security?
How do they keep our precious crypto coins safe?
The financial services industry is highly regulated, and as such, these platforms are built with security threaded through the architecture. However, as cyber threats are continuously evolving and getting more sophisticated by the day, it’s just not enough.
You can bet that cryptocurrency exchanges take a proactive approach to ensure security and privacy. After all, crypto exchanges are desirable targets that threat actors relentlessly attack.
For example, in the last quarter of last year, we saw cryptocurrency exchanges like UK-based EXMO (with almost $5 million stolen), Singapore-based KuCoin (with over $150 million stolen), and Tokyo-based Liquid fall victims to a massive hack.
In this scenario, if a cryptocurrency account is hacked, there is no legal recourse. So, the stakes are undoubtedly as high as they can get. While we are certainly not privy to the inner workings of these leading cryptocurrency exchanges, we do know a thing or two about keeping them safe and secure.
1. Engage ethical hacking services
Internal security teams can only do so much. Even if you hire the best team of developers and security experts, sometimes you have to contend with vulnerabilities in your environment.
To mitigate risk, the best approach is to partner with an established ethical hacking services provider. Cryptocurrency exchanges that hire white hat hackers can quickly identify and rectify security gaps on their platform.
These platforms essentially fortify their security posture through penetration testing, API testing, cloud security testing, infrastructure testing, (both online and offline) social engineering attacks, and more.
If exchange staff are the weakest link, they can be trained by ethical hackers to be alert to sophisticated attacks like phishing campaigns and even in-house visitors.
As reputation is everything in the cryptocurrency world, it’ll undoubtedly pay to secure crypto ecosystems by thinking like hackers. To get ethical hackers on your side, reach out to our colleagues at Citadelo.
2. Encrypt cloud data
Crypto exchanges are much more than digital currencies. They also store sensitive customer data like passports and other identification documents.
To protect personally identifiable information (PII), we at Artmotion recommend leveraging the following encryption protocols to maximum effect:
- Advanced Encryption Standard (AES)
- 256-Bit encryption
- XTS block cipher
If you’re just about to open a cryptocurrency exchange, make sure to partner with a cloud services provider that mandates encryption protocols across cloud infrastructure. Furthermore, it’s best to avoid big cloud brands because they are well-known and more at risk.
For example, the Microsoft Exchange server data breach is an excellent example of how one hack can have far-reaching consequences across customer-bases. A smaller provider can build cryptocurrency exchanges a dedicated setup that can limit risk exposure.
3. Securely store hardware security modules
Protecting a hardware security modules or HSMs is critical as it manages your precious digital keys. HSM also encrypts and decrypts digital signatures, authentication functions, and other crypto functions.
But how do you secure physical hardware with one or more cryptographic chips?
Like anything else in life, if you want to protect your valuables, you need to store them securely in a place that is hard to access. If you don’t have a viable option, you can always keep your HSMs in our highly secure data centers.
Not only will our impenetrable data centers keep your HSMs safe from threat actors, they’ll also protect your hardware from natural disasters, terrorism, and theft. Storing your HSM in Artmotion’s data centers is also one of the best ways to protect hardware from insider threats (remember Mt. Gox?).
4. Store cryptocurrencies in cold storage
To avoid worst-case scenarios, it’s best to store your cryptocurrencies offline in cold storage. This approach helps ensure crypto security as cryptocurrency wallets can’t be copied or stolen when it’s offline.
However, it’s critical to store crypto wallets in a highly secure environment. This means that cryptocurrencies in cold storage should be adequately protected from natural disasters, theft, and so on.
5. Always choose security-as-a-service
In general, cryptocurrency exchanges and FinTech institutions are better off partnering with a security services provider to secure enterprise infrastructure on an ongoing basis.
This is because high-value targets like crypto exchanges can’t afford to take a static approach to security. Instead, their security approach has to evolve consistently with the threat level to stay a step ahead of hackers.
6. Always follow security best practices
It goes without saying, but I’ll say it anyway; always follow security best practices. This includes engaging in multiple-factor authentication (MFA), enforcing strong password policies, zero trust, and engaging in regular staff security training.
7. Engage in real-time monitoring
Regardless of the current threat level, it’s critical to engage in real-time monitoring continuously. This approach helps quickly identify and respond to suspicious behavior. In this scenario, it’ll help to leverage artificial intelligence to be alert to potential threats and respond effectively.
As you can see from the above, securing cryptocurrency exchanges is an ongoing proactive effort to secure both physical and virtual assets. When playing a game of cat and mouse with threat actors, it’s always best to secure your physical hardware, encrypt all data, and employ security professionals that think like hackers.
- Regularly engage ethical hackers to secure your cryptocurrency exchange
- Make sure that ethical hackers come at you with everything in their arsenal (both online and offline)
- Deploy robust encryption protocols
- Always store HSMs in a fortified environment (like Artmotion’s data center)
- Always place cryptocurrency wallets in cold storage
- Leverage security-as-a-service and stay proactive
- Always follow cybersecurity best practices
- Demand MFA across the exchange
- Follow a zero-trust approach
- Engage in AI-powered real-time monitoring
To learn more about securing cryptocurrency exchanges, schedule a commitment-free consultation with one of our in-house security experts.