Though cryptocurrencies are transforming the business landscape of the world, there has been an increase in the number of hacks and scams affecting the credibility of the growing industry.
This has been directly pointed out to weak security on the wallets that store the coins/tokens of the traders. It has led to misappropriation of funds.Hence exchanges have been equipping themselves by introducing wallets enabled with multi-signature and extensive layers of security.
Ways by which security can be enhanced on a wallet
Multi-signature support - It is an additional protective layer which acts useful especially during the processing of transactions. Unauthenticated users cannot carry out transactions as two or more individuals would be required to sign and approve the crypto transaction.
Biometric authentication - Every user will be validated through a facial or fingerprint sensation. Hence only authenticated transactions done by legitimate users will be processed through the system.
Two-factor authentication - It involves a dual verification process to authenticate each transaction. Email and SMS would be used to validate every transaction. It will improve the safety of the users.
Mnemonic phrase - It is either a 12, 18 or a 24 word-phrase used for redeeming crypto assets. It will be directly linked to the private keys and any digital device can be used to recover the wallet.
Password-protected access - Only legitimate users will be granted access to the crypto wallet. This is ensured by using a security PIN that users will enter while operating the wallet to prove their authenticity.
Past incidents that point out to lapses in wallets
Hackers get access to the private keys of users and withdrew their cryptocurrency to an undefined wallet address. It happened for Bitfinex in 2016 where 120,000 Bitcoins were stolen.
Mt. Gox was hacked twice in 2011 and 2014. Private keys were misused and 2643 Bitcoins were transferred to another wallet address. In 2014, 850,000 Bitcoin worth $350 million was stolen by hackers.
Binance, one of the famous centralized cryptocurrency exchanges lost around 7000 Bitcoins due to phishing, virus and other malicious attacks. Funds were extracted from the company’s hot wallet.
Hence, realize the crucial importance of security in Crypto exchange development and strive to establish a safe wallet.
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