- Blockchain Council
- August 22, 2024
Crypto trading platforms employ various safety enchantments to ensure the users and their assets are safe. Investors should take the time to investigate the safety measures when choosing a platform to use. Not all users need every safety measure out there, depending on the amounts they buy and sell and how often they make transactions.
In this article, we’ll go over some of the most important security measures, how they work, and how important they can be to an average user. A good crypto trading platform should have all of the features we mention, and the users should be able to decide which to use on their own.
Two Factor Authentication
Two-factor authentication is the most basic security measure that should be available at every crypto trading platform. It’s used to authenticate and allow transactions using two layers of protection. The users approve the transaction on the platform and then receive a code via email or text to confirm it again.
This method prevents accidental transfers, as well as theft. The code usually comes in the form of a string of numbers to enter, but in some cases, it’s a link that the users need to follow to confirm the transfer.
Encryption
A lot of personal data is involved in making trades on crypto platforms, even though the platforms don’t use centralized financial structures. The data needs to be encrypted to provide extra security. It’s equally important for it to be encrypted both when the assets are resting and when they are being transferred.
Log-in information and transaction details are the most sensitive pieces of data, and they need to be encrypted using protocols like TLS (Transport Layer Security). AES-256 is a common standard for data at rest, which is equally important to protect.
Cold Storage
Cold storage refers to the security mechanisms used to store the data, including the cryptocurrencies, without connecting the storage to the internet. It’s especially important for investors who use crypto trading platforms with leverage. These platforms allow investors to borrow money they’ll use as leverage from the trading institution for larger investments. Not only that, but these platforms enable traders to amplify their potential returns by borrowing funds to increase their trading position. For example, with 10x leverage, an investor can trade $10,000 worth of cryptocurrency with just $1,000 of their own money. While this can significantly boost profits, it also increases the risk of substantial losses, as the borrowed amount must be repaid regardless of the trade’s outcome.
Cold storage is necessary since these platforms’ investors work with more assets. It can’t be hacked because it’s not connected to the internet at all. Platforms also have hot storage, which saves the assets online, but it’s considered less safe.
Multi-signature Wallets
Multi-signature crypto wallets are used by some crypto trading platforms that require multiple keys to allow a transfer. That way, the risk of failure and fraud is smaller since multiple things must go wrong simultaneously for a mistake to happen.
Wallets such as these are also useful tools for those who want to share custody over the assets they own and trade on crypto platforms. That’s often the case with family members or business partners that go into crypto together.
SSL Certificates
SSL (Secure Sockets Layer) is a cryptographic protocol designed to provide secure communication over a computer network. It ensures that data transmitted between a user’s device (a web browser) and a server (a crypto trading platform) remains private and integral. Crypto platforms commonly use it.
Making sure that the crypto platform uses SSL isn’t just about providing an extra security tool. For platforms in many jurisdictions, it’s a matter of complying with the law. The regulations regarding crypto trading are becoming harsher and more detailed, as there are more crypto traders than ever. One of the basics is that the platform needs to use SSL before it can operate in the first place.
DDoS Protection
DDoS (Distributed Denial of Service) protection is crucial for crypto trading platforms to ensure continuous availability and prevent disruptions. DDoS attacks use overwhelming a server or a network with a flood of incoming traffic.
DDoS protection services employ traffic scrubbing techniques to filter incoming traffic and identify malicious requests. There are also methods of detecting anomalies in traffic before they become security issues. The platforms analyze traffic behavior and distinguish between real traffic and one made by bots. Some platforms also implement CAPTCHA challenges to weed out suspicious traffic.
Security Audits
Security audits are reviews the crypto platforms perform to make sure that there are no weak spots in their system. The audits are part of the internal security mechanism set up by platforms, but in some cases, they are also mandatory and part of the regulatory efforts.
The trading platform needs to be open about its audit practices as it’s a way to communicate with the users about the security measures they are implementing. It also helps to know which third-party experts are used to complete the audits. Trusted experts lend credibility to the audits, and the investors should investigate who performs the audits on behalf of the platform they plan to use.
Whitelisting Withdrawals
Users of crypto platforms often make the same withdrawals and send the funds to a few common addresses. These may include their wallets, common purchases, or steady subscription payments. Transactions such as these could be put on a whitelist and go through less complex scrutiny.
The user added the pre-approved addresses. It allows the investors to continue using all the safety features and control, which addresses can be trusted. The customization provides for a better user experience.
Anti-Phishing Measures
Phishing is one of the most common threats crypto users face since they must provide an email address to transact. Fraudulent emails are used to obtain your email address and access digital assets.
The most important measure out there is to raise the user’s awareness of this problem simply, make sure the users don’t open suspicious emails, and teach them how to recognize such emails. The platforms also implement PF (Sender Policy Framework), DKIM (DomainKeys Identified Mail), and DMARC (Domain-based Message Authentication, Reporting & Conformance) protocols to authenticate email senders and detect spoofed emails.
Biometric Authentication
Ultimately, the latest safety feature some platforms are implementing is biometric authentication. These can be used to log into the platform account or to confirm transfers. The most common biometric authentication measure is the fingerprint, but other more sophisticated ones such as face recognition and even retina scans, exist.
Some crypto platforms use voice authentication to make sure that users agree on transactions. Behavior analysis measures have also been put in place. For instance, if a user starts logging in at strange times and from strange places, it may trigger a safety warning on behalf of the platform, as it shows someone else is using the service.
Conclusion
In conclusion, the robust security measures employed by crypto trading platforms play a crucial role in safeguarding user assets and maintaining trust. The fundamental protections include two-factor authentication and encryption. Advanced defenses such as DDoS protection and biometric authentication are there to ensure the integrity of transactions and user data.
Compliance with SSL protocols and rigorous security audits further underscore their commitment to regulatory standards and user safety. As the crypto landscape evolves, investors must prioritize platforms that prioritize security, offering comprehensive measures tailored to mitigate emerging threats and ensure a secure trading environment.