The Importance of Security in the Current Cryptocurrency Space
In the cryptocurrency space, the need to have improved safeguards is critical.
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Increased security has played a critical role in the cryptocurrency space in 2018. The current state of the market has dictated a stronger need for more secure transactions. SEC Chairman Jay Clayton has been harping on the importance of increased security and accountability for transactions. An increase in market surveillance is imminent, and businesses that understand the importance of security will win in the future.
“We've seen some thefts around digital assets that make you scratch your head. We care that the assets underlying that ETF has good custody and that they're not going to disappear.” — SEC Chairman Jay Clayton.
The need to have improved safeguards is critical. There is much diversity in the solutions offered, from smart wallets to safer contracts. However, when it comes to security, there needs to be an overarching philosophy around conducting crypto-transactions.
Currently, there is a lack of scale on this side of the market. There are a few fragmented players that don’t have direct access to a larger market. A larger size of the crypto-market is still conducting daily trades and transactions using unsecured networks.
Challenges With Security in Cryptocurrencies
About $1.1 billion worth of cryptocurrencies were stolen in the first half of this year. The space has been taking precautionary measures ever since and is working with traditional banking institutes to provide security. With more than 56 percent of crypto-crimes happening in the US, traders are opting for more secure routes like developing custom wallets, increasing transaction requirements/paperwork, etc.
There are multiple challenges that the crypto-space is dealing with when it comes to security. The storage, transaction, and retrieval of the coin relies on using some form of online technology. This could lead to the account getting hacked even before the transaction has been made. When more entities use secure transaction models, the inherent value of that currency rises. Otherwise, the underlying risk always exists, and the wallets could be hacked at scale.
Additionally, there are also chances of theft emerging from compromised phones. Since more cryptocurrencies are offering mobile app extensions, the phone can become a pathway for hackers. While the mobile app may not show signs of theft, it could be running a background program that creates a backdoor entry for malicious parties.
Modern Security Measures
Entities are opting for a smarter wallet, as well as robust contracts, using deep-learning and practicing cold and hot-storage techniques. Each option has its own merits, while many falling short in scaling to become ubiquitous. Right now, the best option for crypto-businesses is to develop their own secure wallet. This ensures that they’re in control of their currencies and can transact in the domain with ease.
Private keys can be stored securely in the wallet, with built-in features such as auto-rejection of duplicate payments and authentication beyond two-factor. Working with a premier crypto-wallet development team has helped businesses become more secure when transacting in crypto. The designed app/wallet can also adhere to standards that of the highest grade. You don’t need to rely on market substitutes that may get hacked.
Crypto-holders are also going forward with reputed exchanges to trade on a regular basis. Brands that are well known in the marketplace are considered to be more secure. However, there is a large subset of the crypto market that still deals in unsecured spaces. That’s why Coinbase, AvaTrade, and other exchanges are making transactions much easier, and with lower fees. They’re considerably more secure than using an alternative.
Using a cryptocurrency custody solution is also a viable option, but it is not something that everyone wants to deal with. Essentially, a third party can secure your private key while you can safely store and transact in the marketplace. Businesses and entities have multiple options to choose from, including storing their private key completely disconnected from the online world. This form of storage is a popular security feature in the case of large-format transactions.
With Fidelity’s interest in crypto rising, Goldman Sachs is also considering the possibilities of crypto-custody services. Fidelity has been working on key technologies to make trades safer under its Fidelity Digital Asset Services banner. Goldman has been emphasizing the importance of having better safeguards and using secure services to provide stability.
“Custody is this foundational piece that is necessary. Custody is part of an overall integrated system where different parts need to work well with each other and safely with each other, and you have to be able to trust all the different parts in that chain, from buying something to transferring it to storing it in for the long-term.” — Justin Schmidt, Head of digital asset markets, Goldman Sachs
Developing Increased Security in Crypto
Not only are markets affected by hacks and scams, but the consumer demand for the currency depreciates with lapses in security. That’s why crypto communities need to work on developing advanced technologies that work within a robust compliance framework. While having a multi-layered approach to security is key, making it simple works best. From encryption to physical-realm authentication, there are many methods to make crypto scale well.
The Crypto Consortium has their own strategies to deal with security, as a part of their CryptoCurrency Security Standard (CCSS). They detail the technologies and practices to make transacting safer. They’re driving a significant portion of the discussion in the security space, with committee members Andreas M. Antonopoulos (CTO of Third Key Solutions), Mike Belshe (CEO of BitGo), Glen Bruce (Deloitte), EJ Hilbert (PwC) leading in the domain.
With both Coincheck and BitGrail being hacked this year, the industry has shifted towards providing more security features. Apps, web platforms, wallets, and exchanges platforms have increased their firewall strength and introduced new compliance practices within these frameworks.
An important practice that every crypto-owner should follow is to have hot and cold wallets in their possession. A hot wallet could be connected to online exchanges but have enough security features to allow for scaled transactions. Although a cold wallet may take advantages away from real-time trading, it’s a good strategy to have physical keys. Savvy owners are printing out the key and distributing the pieces across a combination of safes across various geographies.
There are several developers that are working on enhancing the infrastructure that crypto leverages. While blockchain is inherently safe, there are several instances of incomplete decentralization and weaker security chains. That’s why it’s a smart strategy to develop your own security tools that can safeguard your interest in the form of wallets and smart crypto apps.
It’s critical to find the right solutions when it comes to cryptocurrency security. With a rise in theft and increased volatility in the market, entities must be able to transact with ease. Whether it is secure wallets or crypto-custodians, it’s important to work within a robust security framework. Companies, traders, and crypto-enthusiasts are also working with leading firms to design secure apps that leverage the blockchain.
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