Cybersecurity For Cryptocurrency Exchanges: Protecting Digital Assets

Cybersecurity for Cryptocurrency Exchanges: Protecting Digital Assets

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by Evelyn Addison — 1 year ago in Blockchain Technology 6 min. read
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In 2020, about $0.5 billion of crypto assets were stolen. In 2021, this number rose to $3.9 billion. In 2022, this figure reached a whopping $8 billion. If there’s one abundantly clear thing is that the number is growing at an alarming rate and that crypto is still not safe enough.

Still, not everything is black and white. Sure, in 2022, malicious parties stole eight times more than in 2020, but how many more people have their assets in crypto than two years ago? More importantly, how many people know how to protect themselves in this new financial environment?

So, we will first tackle the risks of cryptocurrency exchanges and then try to offer some ideas on keeping yourself safe. This is important for both cryptocurrency users and exchanges, so listen up!

Risks of Cryptocurrency Exchanges

The main reason why people are so cautious of cryptocurrencies is the fact that they are a relatively new asset type. This means there are still no definitive (proven) solutions to some of the most common problems regarding this asset.

Some of these problems still don’t have a definitive solution, and some time will pass until we have our answers.

Hard to Prove a Mistake

Cryptocurrency is near-impossible to trace, which means that once you transfer the money, that’s it. It’s highly unlikely that you’re ever getting it back. It’s also near-impossible to prove that you’ve made a mistake or sent the assets by accident.

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Losing a Key

Crypto assets are secured by two keys – public and private. You have the public key, but you cannot return your assets if you lose it. There are a few ways around this. For instance, you could use a Bitcoin wallet or choose a trusted exchange.

The Volatility of The Market

Even though cryptocurrency is becoming more common, it’s still incredibly volatile. The values of tokens can change rapidly, which means that buying and selling crypto always carry an amount of risk. However, this is a fear you can just do nothing about. The best you can do is apply some smart investment strategies, like diversifying your portfolio.

Relatively New Concept

The main reason why so many people are cautiously approaching cryptocurrency is that it’s a relatively new asset type. When you compare it to a commodity like gold (whose value we can trace back millennia), it’s still new and unproven. Its limited history makes people uncertain of what to expect.



Regulation

Regulation is a huge uncertainty in this field. For instance, China proclaimed cryptocurrency transactions illegal in 2021. In theory, while it is highly unlikely, other countries might eventually decide to follow suit. Again, this outcome is highly unlikely in Western democracies, but it’s not something one should automatically rule out.

Theft

As we’ve mentioned, it’s near-impossible to prove a mistake, so if a thief successfully gets a hold of your crypto assets, there’s not much you can do about it. This is why it’s best to keep your assets private and even avoid mentioning that you own any assets in crypto.

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Key Takeaways

While the risks are there, there are several things that you can do to protect yourself and your crypto assets. In the next part, we’ll focus on how to be more proactive and stay safe in cryptocurrency.

Learn How to Buy BTC Safely

The most important skill you need to develop is to learn how to buy BTC in the safest way possible.

The process itself is not difficult. Once you have a BTC wallet and an email address, you only need to find a safe exchange. There, you enter the amount you want to buy, and you can use various payment methods.

The challenge lies in finding the right platform to buy BTC on.

There are a few factors you may want to consider. First, you want to ensure the platform allows purchases from your country. While this is usually not the problem since most platforms try to support as many regions as possible, it’s worth checking out.

Second, you need to check payment methods. Since the industry is the way it is, most electronic payment methods should be available by default.

Try It Out

The best advice you can get is to find an exchange where you can buy as little as possible. This is a way to get your little trial period. For instance, if you can buy for as little as $30-$50, you can make your first exchange with as little risk as possible. You also get the reassurance you need while putting as little as possible on the line.

Lastly, you should do some independent research on your exchange. Dig around, read reviews, and check what people say about it. Just understand that different people have different experiences. Just because someone had no issues doesn’t mean it will be the same in your case. The opposite is true, as well. Someone else’s bad experience doesn’t mean the platform is automatically bad.



Check for Compliance with Data Discovery

Even something as intimidating is no longer that difficult with the help of data discovery.

What is Data Discovery?

The simplest way to explain would be to say that it’s a sped-up process to help you figure out if an organization complies with all the privacy laws. Now, instead of hiring a legal expert’s services and waiting for hours and days to review the situation, you can have it over in minutes.

As we’ve already mentioned, the landscape of cryptocurrency compliance is ever-evolving, which is another reason you would need this tool. Staying updated and ahead of the curve can keep you safe.

Needless to say, this is also invaluable for those hoping to start their crypto exchange organizations. This way, they can stay ahead of the curve. Most importantly, with this technology, there are no longer any valid excuses for not complying.

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Take Necessary Safety Measures

The most important thing to understand is that crypto traders are a huge target. Hackers, scammers, and thieves know that stealing crypto has fewer consequences and that the payoff is potentially huge. This is why individual users and crypto traders are more responsible for keeping themselves safe.

This is important from both practical and ethical standpoints. Think about it. Every time you allow someone to get away with stealing crypto, you’re technically enabling and encouraging this industry. So, for the sake of the entire field, do what you can to stay safe.

For Instance:

  • Always use a unique password. Using your kid’s birthday as a password is not a good idea. It’s a common password pattern; all it takes is someone to go to your Facebook page and check the date of the last-uploaded kid’s birthday party. That’s it!
  • Second, look for 2-factor authentication (2FA). This is not just a safety measure. It’s also a warning. If you get an SMS or an email with an access code (without requesting it), you can tell that something’s off. This is one of the oldest security rules, and you must take it seriously.
  • Diversifying your bitcoin storage options is also essential. Even if you have a lot of crypto assets, the last thing you want is to keep them all on a single exchange.
  • Lastly, as mentioned, you shouldn’t tell people you have crypto assets. We know it’s reassuring to think that hackers exist just in the digital world or are hiding in a basement half a world away. However, you would be unpleasantly surprised at how wrong this presumption can be.

These few tips alone can make you safer and your assets more secure.



Consider Using VPN

Those who want to stay extra safe online might want to consider using VPN for their transactions.

VPN doesn’t help you stay anonymous from your exchange, but it can make it much harder for anyone to track you, regardless if we’re talking about a government or a malicious third party.

The data you send through the network will be harder to track, and you’ll get another layer of security against malware and phishing attacks.

Most importantly, you need to be serious about your use of VPN. If you plan to use it for crypto transactions and intend to use it as an important cybersecurity measure, you should pay for a premium plan. Free VPNs might not offer enough protection, and they will give you a false sense of security.

You are looking for two features in your VPN: a kill switch and a no-logs policy. This way, you get everything you need in the simplest way possible.

You need to be Aware of The Risks and Take Your Cybersecurity Into Your Own Hands

Cryptocurrencies are a relatively new asset type, which is why there are many security risks that people are still not aware of. Raising awareness and learning how to protect your assets is the key to financial literacy, and the world of cryptosecurity exchange is not an exception to this rule.

Set a secure password, use two-step authentication, and pay for a reliable VPN. Most importantly, research the exchange you intend to trade on ahead of time.

Evelyn Addison

Evelyn is an assistant editor for The Next Tech and Just finished her master’s in modern East Asian Studies and plans to continue with her old hobby that is computer science.

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