Security Standard Proposed for Bitcoin Exchanges

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Due to the rapid development of a cryptocurrency environment, the value of Bitcoin is becoming even stronger. Unlike other digital currency, Bitcoin is constantly showing its positive dynamics in terms of price and public acceptance. It becomes obvious after recent exchange rate increase, which is 1113.5$ now according to CEX.io.

However, the ever-widening popularity of Bitcoin has resulted in more frequent hacking attempts towards cryptocurrency-related service providers. Cryptocurrency exchanges are no stranger to various hacker attacks aimed at activity disruption and virtual money theft. Being a major bitcoin pool, they are always subject to cybersecurity risk and threat.

Breaking news from cyber security world

Hardly had the Bitfinex community recovered from $70 million theft, when it again suffered a heavy cyber attack in February 2017. One of the largest cryptocurrency exchanges became a prey to massive DDoS attack. It paralyzed the operation of a trading platform for hours. Another piece of news that knocked bitcoin holders down came earlier this year. Cyren Security Center discovered a new form of malware, stealing passwords and thus coins from users’ wallets.

Hackers are becoming more innovative and venturous in their greed for gain. So, it comes as no surprise that bitcoin trading providers try to protect their activities in every possible way. Pursuing better security, bitcoin exchanges and traders implement new comprehensive approaches to safe bitcoin storage and transaction management.

In pursuit of better security

One such approach has recently been introduced by the CryptoCurrency Certification Consortium. They appeared with a security guidance for cryptocurrency-related service providers. CryptoCurrency Security Standard draft sums up the best security practices. These practices are to enhance and complement security standards adopted by a vast majority of cryptocurrency traders. CCSS is following the idea of strengthening the security levels of all information systems, dealing with digital coins. CCSS creators believe it is possible after the implementation of advanced authentication procedures, multiple signature techniques, and decentralized storage methods. CryptoCurrency Security Standard can make a real breakthrough in the world of digital money if approved by the public.

While this one-for-all security approach is under consideration, bitcoin exchanges are working their way forward. They are getting to grips with the hackers by all appropriate means.

Caution is the parent of safety

Following the lead of the most trusted and reliable platforms, one may define essential security aspects, which are obligatory for implementation.

Multi-factor authentication

Most Bitcoin exchanges employ this strategy to add another level of security to their systems and thus set additional barriers for intruders. To access the wallet a user needs to go through several phases of the verification process to be approved by the system. Authentication credentials include information about something a user knows, possesses and is identified by. Generally, the user identity is validated after providing a proof in the form of a secret token or one-time code together with his username and a password.

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To make Bitcoin transactions safe and hard to intercept, it is essential to apply multi-signature approach. This technology requires the participation of several users while transferring bitcoins from one account to another. The transaction is finalized only when all involved users confirm it with a unique signature they own. This security method is one of the most efficient for protecting bitcoins from stealing, but only a small number of Bitcoin trading platforms provide this option to their users.

Wallet encryption and backup

Advanced encryption is characteristic of the Bitcoin protocol and cryptocurrency-related operations. To make a wallet secure from external reach, it is necessary if not obligatory to keep it encrypted inside the Bitcoin client, using a dedicated passphrase. It serves as a locking mechanism, which blocks any activity within the wallet. Always make regular backups both digital and physical to recover the wallet in case the passphrase is lost or forgotten.

Cold storage

Keeping bitcoins online only is not a wise decision to be made. Unlike hot wallets, which are stored online, cold wallets are less likely to be compromised or hacked. Cold storage options refer to those media, which are available offline, and include paper, hardware and software wallets. Deciding upon multiple locations for the bitcoins to be stored in, gives the user better control and maintenance over his funds.

Keep your eye on the big picture

Given the growing popularity of cryptocurrency among the general public, the Bitcoin market is booming with a huge number of bitcoin-related service providers and exchanges. Some of them are really concerned with the level of security they provide and employ the most advanced and innovative methods to earn customer loyalty and confidence. With all methods mentioned above they implement an even wider range of security measures and policies.

AML/KYC Policy

AML/KYC stands for Anti-Money Laundering/Know Your Customer Policy. Compliance with AML/KYC standards means that the chosen exchange is following the principle of preventing abusive financial practices and illegal actions from external parties in order to ensure the utmost transparency of Bitcoin transactions.

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As the name implies, with the adoption of Anti-Fraud Policy a Bitcoin exchange is committed to detection any fraudulent practices within its network, as well as reporting any suspicious activity to competent authorities.

Looking ahead

Governments have long been trying to put Bitcoin and its service providers under strict regulations. The decentralized nature of cryptocurrency environment imposes limitations on state interference in Bitcoin mining and trading, which obviously triggers a rush of indignation among public officials. Will the implementation of globally-accepted regulations by Bitcoin exchanges become the first step to Bitcoin centralization? Unfortunately, there is no hard and fast answer yet.

What is clear now – Bitcoin exchanges are diligently paving their way to better security and acceptance by introducing improved monitoring techniques to ensure further development and stability of Bitcoin environment.

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