Recent security breaches in the cryptocurrency industry have underscored the critical need for enhanced protection measures across all exchanges. Two major incidents have highlighted vulnerabilities: Binance user accounts were compromised through a malicious Google Chrome plugin, and attackers used AI-generated deepfakes to deceive OKX customer service, resetting account passwords.
Centralized exchanges (CEX) are particularly susceptible to security threats, including hacking and exploitation of vulnerabilities. Historical incidents, such as the suspected Binance hack in March 2018, which caused a significant drop in Bitcoin's market value, emphasize the financial risks involved. In 2019 alone, over 28 security incidents were recorded, with more than 70% involving the theft of digital assets, leading to substantial financial losses.
Governments and regulatory bodies worldwide are responding to these threats by introducing specific regulations. South Korea's government mandates that virtual currency exchanges with substantial daily sales or visits must obtain an Information Security Management System (ISMS) certification. China has banned all services related to virtual currency settlements and trader information provision.
To address these threats, exchanges have implemented various security measures, including on-chain data solutions, multi-factor authentication (MFA), SSL encryption, and cold storage. Regulatory compliance is also crucial to ensure operations within legal frameworks. Effective security in crypto exchanges involves coordinated efforts between exchanges, regulators, and users.
CoinW is committed to providing a secure trading environment through robust security measures and risk control systems. According to CoinW's Head of Security, a centralized exchange operates akin to a bank's core system, encompassing frontend and backend safety, technical solutions, security assessments, data storage, and communication encryption. CoinW prioritizes private key security using multi-signature (multi-sig) technology and traditional sharding methods for key storage. In case of hot wallet issues, backup systems are in place for recovery, and substantial funds are stored in cold wallets.
CoinW's internal mechanisms are crucial, including real-time security incident monitoring and response. The system swiftly detects and addresses suspicious activities, such as unusual network access or abnormal login attempts, by implementing enhanced verification methods for long inactivity or remote logins. CoinW provides instant notifications for any anomalous transactions.
For business risk control, transactions triggering risk conditions undergo secondary manual review, ensuring an additional layer of scrutiny for accounts with unusual activity. CoinW's wallet security is fortified through Multi-Party Computation (MPC), distributing keys across four systems, requiring unanimous approval for any transaction, thereby preventing unauthorized operations.
Additionally, CoinW has integrated Know Your Address (KYA) alongside the Know Your Transaction (KYT) system to elevate security standards. KYA analyzes and categorizes blockchain addresses, enhancing the capability to identify risks and protect user assets. This integration solidifies CoinW's position as a leader in security within the cryptocurrency industry.
CoinW has also achieved compliance milestones, such as obtaining the digital currency trading service license from the Australian Transaction Reports and Analysis Centre (AUSTRAC). This license allows them to conduct spot trading and fiat currency trading in digital currencies, ensuring a safer and more reliable trading environment for their customers.
In summary, the security level of a centralized exchange is determined by its technical measures, business operations, internal management, and its response to security incidents. These factors collectively ensure the robustness and reliability of the exchange, providing users with a safe and trustworthy trading environment.
