Any active participant in the cryptocurrency industry has probably come across the word “hacking.” The ultimate goal of blockchain technology was to prevent theft, malware attacks, or any kind of hacking. However, there are also cases where hackers exploited vulnerabilities existing in exchanges. This is where entrepreneurs need to be smart before starting a cryptocurrency exchange.
It’s also important to understand the common ways hackers infiltrate your platform. Many entrepreneurs incorrectly assumed that exchanges were less likely to be hacked because they contained blockchain technology. Eventually, exchanges became website platforms like any other website. Therefore, it is essential to ensure that your exchange can endure for a long time to be on the safer side, including sufficient protection against any kind of spam, viruses or attacks.
Coinsclone’s blockchain experts provided thorough analysis and answers on how to build a hack-free exchange. We also focused on hacking case studies and ways to prevent hacks in the future. Before that, here is a brief overview of what a cryptocurrency exchange is.
What is a cryptocurrency exchange?
Cryptocurrency exchange is a trading platform for users who want to conveniently buy, sell, and trade cryptocurrencies. These exchanges have a variety of ways to make money. As a result, most startups create cryptocurrency exchanges without a second thought. However, it is important to include the best security features and test the platform thoroughly before starting your business.
Why is it important to include top-notch security on cryptocurrency exchanges?
Integrating advanced security features during the cryptocurrency exchange development phase is an easy way to resist hacking attacks. The trust factor is why we emphasize building secure or unhackable exchanges. Users sometimes surge towards unhackable exchanges in huge numbers. Will the same level of trust be maintained after a hack occurs on an exchange? Probably not, and this could result in significant losses for your business.
Second, there will be significant question marks about blockchain technology in society. It is nearly impossible to change transaction data on a blockchain, but even a small loophole can be enough for hackers. In particular, during a fork, security can be at risk if the community changes the blockchain protocol and splits the existing chain in two directions.
As digital currencies are seen as the future, maintaining user trust in blockchain or cryptocurrency is essential. Let’s discuss a few case studies of hacks in the blockchain industry to understand how security can be maximized.
Blockchain industry hacking case study
According to one study, more than $20 million will be stolen by hackers by 2022. Cryptocurrency exchange hacking began in 2011 with Mt.Gox being the first exchange to experience such activity. Other large exchanges facing hacking issues include:
FTX
FTX, one of the largest cryptocurrency exchanges, previously went bankrupt in 2022. Hackers have stolen more than $470 million from cryptocurrency wallets. The FTX Telegram channel speculated that the website could download Trojans and advised users not to visit the site. Despite Binance’s efforts to bail FTX out of a difficult situation, mishandling of customer assets left a gaping hole and liquidity issues also emerged.
Coin check
Cryptocurrency industry giant Coincheck suffered a major setback in 2018. The exchange was hacked and more than $500 million was stolen. The main reason for the hacking was the use of hot wallets. However, the exchange has overcome the difficult situation and is slowly showing signs of recovery in the market.
bitmart
In 2022, hackers withdrew approximately $200 million from wallets on the centralized exchange BitMart. The problem was the private key to open two hot wallets. The Exchange CEO later promised to compensate victims of the malware attack. This turned out to be one of the biggest hacks on cryptocurrency exchanges and is still being discussed.
If you’ve noticed one common problem that keeps recurring on these exchanges, it’s the hot wallet feature. Additionally, this malware activity could have been easily prevented if security had been at the highest level during the development phase. Therefore, it is important to know what security features an unhackable exchange should include to ensure its safety.
Security features that should be included in cryptocurrency exchanges
Security features may vary from company to company, but cryptocurrency exchanges are mandated to upgrade their security. Compensating for security can lead to risky situations. Security features that can help you build an unhackable exchange include:
HTTP authentication
Hypertext Transfer Protocol (HTTP) basic authentication is a fundamental step in securing exchange platforms. Before entering the exchange, the server sometimes asks the user for authentication information, which may be a user ID or password, or both.
End-to-End Encryption
Most users would have come across this feature in WhatsApp. End-to-end encryption is a way to secure communications between two users and prevent third parties from accessing the data. Even worse, anyone with access to the endpoint device can only read the messages, so Google can’t see them.
data encryption
Data encryption protects the confidentiality of digital data by converting plaintext into unreadable digital code ciphertext. During encryption, only the sender can read the text. In order for the recipient to read it, the data must be decrypted, converting the encrypted ciphertext into plaintext.
2-step verification
Two-factor authentication helps reduce the risks associated with password breaches. If one password is hacked, your assets are still safe with two-step authorization. This means that swapping entries is only allowed if both identifiers are accepted on the other end.
SQL Injection Prevention
Structured Query Language (SQL) injection is code injection that hackers use to read and access data in databases. Typically adopted and distributed through website APIs. SQL injection can be prevented by careful use of parameterized database queries with bound and typed parameters and parameterized stored procedures in the database.
Cross-site request forgery (CSRF) protection
CSRF occurs through emails or links that manipulate victims into sending forged requests to servers. CSRF attacks are possible against websites that use cookies for authentication because the browser sends all relevant cookies to the target website. Exchanges can protect against CSRF attacks by including CSRF tokens in the relevant attacks.
Server-side request forgery (SSRF) protection
SSRF attacks can give hackers access to restricted services and internal activities. Here hackers attack server functions to change resources. Data retrieved from URLs is commonly targeted by hackers. This can be protected by disabling unused URL schemes.
Denial of Service (DoS) Prevention
A denial of service attack is performed when a hacker blocks access to a component of a website. Splitting your network into small, manageable pieces can help prevent these DOS attacks. Anti-DOS allows users to safely visit the platform without any inconsistencies.
Distributed Denial of Service Prevention (DDoS)
Anti-DDOS prevents hackers from attacking multiple systems and launching attacks on remote hosts simultaneously. DDOS attacks pose a serious threat to a website’s security system. You can prevent DDoS attacks by creating a layer of physical protection against hackers and your network.
How can I solve the problem with a clone script?
Major cryptocurrency exchanges have also faced hacking issues from time to time, uncovering vulnerabilities that need improvement. The one-stop solution for crypto exchange development called Clone Scripts is designed to be rich in security features. It can also be customized according to the entrepreneur’s wishes and is easy to use.
Despite being able to solve several problems, our cloning script cost is quite affordable in the market. The main reason for these budget-friendly prices is that the clone scripts are multi-tested and pre-made. If you compare the cost of a clone script to typical development starting from scratch, the difference is quite significant. In fact, with the help of a replication script, you can develop an exchange in just 7 to 14 days.
conclusion
In real time, hackers are always looking for ways to infiltrate exchanges. It’s a startup’s duty Entrepreneurs can stay one step ahead of attackers by incorporating the best security features into their exchanges. Luckily, the introduction of replication scripts allows entrepreneurs to feel safe and build their exchanges in the best possible way. Join hands with CoinClone Experience a fantastic unhackable exchange with the highest safety measures.