Disclaimer: The Industry Talk section features insights by crypto industry players and is not a part of the editorial content of Cryptonews.com.
Cryptocurrencies are decentralized currencies that don’t need intermediaries to work – they depend on the underlying software. Each transaction involves running a piece of code that is entirely transparent and open. This is the reason why the crypto industry is vulnerable to hackers and scams, as it exposes itself to potential vulnerabilities in the code that can be exploited.
Exchanges are a major target for hackers, as they hold an immense amount of currency in their wallets. Mt. Gox, one of the biggest crypto exchanges in the world, was hacked in 2014, with the attackers stealing 850,000 Bitcoin, worth around $450 million at the time. This was just one of the many high profile exchange hacks, with others including Bitfinix, Coincheck, and Kucoin.
The good thing is that most major crypto exchange platforms have taken steps to improve their security to better protect customer deposits. To achieve this, exchanges often move the majority of customer funds to cold wallets (held offline) while maintaining a small portion in hot wallets to provide liquidity. They also employ third-party custodians that offer crypto vaults with additional security, like multi-authorization wallet management. Two-factor authentication is also a common security measure, requiring users to log in and access their funds from two different devices. Furthermore, withdrawal whitelists and anti-phishing codes help protect user funds from malicious hackers.
Some exchanges have taken exceptional measures to ensure user security. Nexo, for example, has achieved Security, Trust & Assurance Registry (STAR) Level 1 Certification, completed a Service Organization Control (SOC) 2 Type 2 audit, and achieved ISO 21 001 standardization back in 2019. Huobi, meanwhile, has created a User Protection Fund and Huobi Security Reserve that together ensure it has the assets to fully compensate its users in the event of a hack. Kraken encrypts everything – not just account information but also user data – and provides users with kill switches to lock down their accounts. They also protect their servers with biometric scanners and armed guards.
Despite these measures, exchange hacks are still alarmingly frequent. Kucoin was successfully attacked with social engineering techniques, while Trust Wallet users were deceived into revealing sensitive information that enabled hackers to access and empty their accounts.
Crypto users must do their research to ensure the exchange platform they use can be trusted. It’s important to look at the reputation of the platform, the verification requirements, and the security systems they employ. Once you’ve found a reputable platform, make sure to check if they are using the most advanced security measures.
