Cybersecurity is one of the world’s most pressing concerns at the moment. State departments,
Crypto trading is no exception to the ongoing cybercrime epidemic, given the large rewards available for hackers. The early days of cryptocurrency were denoted by hacks of centralized exchanges (such as Mt. Gox), while phishing scams are a frequent occurrence to this day.
Cryptocurrency is regarded as being safer and more secure than traditional currencies, but there are cybersecurity concerns to be addressed when trading, investing or storing these assets.
The
Crypto Cybersecurity Safeguards
If you are trading using your own account, then it's of the utmost importance to engage in Two Factor Authentication (2FA). Otherwise, if a hacker gains access to your account (through your username and password), all your trading funds are at risk. 2FA vastly decreases the chances of your crypto assets being compromised, but users are still reluctant to implement this simple feature.
Taking security precautions is also important, even when working with well-established providers. 3Commas, one of the largest names within the crypto trading bot industry, recently had over
These API keys are used by automated bots to trade on exchanges, and an amount somewhere between $10 - $25 Million has been stolen from customers. While this is damaging to 3Commas, events like this highlight the necessity of improvements in API security, and it can serve as a wake-up call to the industry.
All crypto bot providers use API keys to connect to exchanges, but there are different ways to prevent them from being leaked. Bitsgap, for instance, protects API keys in multiple ways. The trading provider offers advanced API protection, including encryption, the one API Key Rule, Countertrade Protection, API Key IP Whitelisting, and Fingerprinting. Other providers implement similar safeguards.
The one API key rule is particularly effective because only one API can be used per account. It means the API can only be used on the platform. This might have helped 3Commas as the API keys would not have been used on a different account to siphon user funds. When a security breach occurs within Web3, other platforms can take note and increase their cybersecurity protocols - few companies are immune from relentless cybercrime groups.
Additional Cybersecurity Safeguards For Crypto Trading
Staying safe within the world of crypto trading is not as hard as it seems. Despite the many hacks and scams, it is often basic user error that causes the loss of funds. The following are simple yet effective safeguards for long-term crypto trading:
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A strong wallet for crypto assets, such as a hardware wallet.
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Make two secure copies of the wallet keyphrase. These can also be self-encrypted.
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Only trade a small percentage of your total crypto assets. This minimizes the total amount you can lose in the event of a security breach.
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Only work with regulated exchanges and third-party providers. They should have a long history and use the most robust security features.
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Enable 2FA on all accounts and all trades, as well as withdrawals.
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Avoid hype. Diversify your assets and take time to study and research the field of crypto trading.
It might also be a good idea to keep abreast of the latest cybersecurity breaches and to understand the psychology of cybercrime.
How Safe Are Third-Party Providers?
The entire premise of cryptocurrency is based on the idea of direct ownership. In the case of Bitcoin, the original cryptocurrency servers are decentralized and anonymous, supporting the network. Every wallet has a unique identifier and private key known only to the owner. As long as the owner keeps this safe, the funds are completely under his or her control.
As time went by, third parties started to enter the fray with custodian services. This had the benefit of convenience and increased efficiency. However, it also resulted in a reduction in security in certain instances. When people are eager to earn profits, cybersecurity often takes a back seat. Plus, anytime information is sent online, as opposed to stored locally, the risk of interference increases dramatically.
The bottom line is that everybody has to use third-party providers for the purposes of trading and investing in cryptocurrency, as it increases operational efficiency. But it comes with a risk because your information is being sent online.
So make sure to take advantage of all the safeguards the crypto platform has to offer. The simple implementation of 2FA can go a long way to securing your trading account, yet many fail to take the time (less than 2 minutes) to set it up.
User error remains the number one concern in crypto cybersecurity by a very large margin.