Best solution to avoid exchange hacks
Since the inception of Bitcoin in the year 2009, there were many digital exchanges which came into the picture. In a short while, substantial growth in the number of people over the digital exchange platform is seen. Though this growth is a good sign for bringing up of digital currencies in the global market, with this growth the number of scams is also increasing day by day. Hence, it is the duty of the trader to be more careful while exchanging their funds over these digital exchanges. In this article, we will be discussing the risks associated with the use of digital exchanges and the applicable solution to it
What is a digital exchange?
A digital exchange is basically a platform where the buyers of digital currencies and the seller of the digital currencies meet and accomplish the exchange without need of any middleman. Therefore we can say that in the case of digital exchanges, the trade of digital currencies is performed in a decentralized way.
What are the risks associated with digital exchanges?
There is a common perception amongst the majority of people that the application which works over the blockchain interface cannot be hacked. But, with the advent of new techniques, even the hackers are also using smart ways to get access to your digital wallet, thereby, even a digital exchange is not at all hack-proof. Further, some of the major risks associated with digital exchanges are as follows:-
Inability to track the transactions:
Though the decentralized nature of the digital exchanges has eliminated the need for any middleman, at the same time, it has made it difficult to track the transaction activities due to the cluster of data network
Use of single key access
It is very important for traders to make sure that the digital exchange which they are using for trading purpose is secured. Single key access makes it easier for hackers to get access to your digital wallet. Thereby, you can lose a big amount if the hacker is able to retrieve the private key
Use of public networks
Another big risk associated with the users available over the digital exchanges is the use of public networks to access their digital wallet. These networks are the target networks for the hackers who are keenly looking for getting access over your digital wallet accounts.
What is the solution?
Undeniably, every problem has a solution. There are a number of exchanges which are looking to give a secure and safe trading experience to the digital exchange traders.
For instance, a startup named Arwen works over peer to peer exchange layer 2, which make sure that in case the coins are hacked, then the users still have the right to recover the lost coins by closing the escrow prior to the deadline. Further, there are certain solutions that can be implemented to avoid account hacks, which are as stated below:-
Use of peer-to-peer exchange
The use of peer-to-peer exchange can directly mitigate the risk associated with trading the digital currencies. A P2P exchange basically establishes direct trading between the buyer of digital currency and the seller of the digital currency. Thereby, there is no need for any middleman to facilitate the trade between the two parties. Hence, the buyer and the seller both have private keys to access their personal account.
Multi-signature encryption
One of the most important things over which a trader must emphasize while choosing a digital exchange for trading digital currencies is the multi-signature encryption associated with it. Multi-signature encryption makes it very difficult for the hacker to get access to the account because he needs to know more than two private keys to get access to the digital wallet. Therefore, in this case, less risk is associated making it almost impossible to hack.
Accessing via Private network
One must be very careful while opting in between a public and private network. A private network keeps the user’s information anonymous. Therefore, none of the people can access the information associated with another person. Hence, the digital currency trading is more secure in this case.
What are people saying about digital exchanges?
“Blockchain technology could change our world more than people imagine,” “Bitcoin however could be a bubble.” — Jack Ma (Chinese Investor, Philanthropist and Co-Founder of Alibaba)
“Virtual Currencies may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system.”– Ben Bernanke (14th Chairman of the Federal Reserve, the Central Bank System of the United States)
“There are three eras of currency: Commodity based, politically based, and now, math based.” — Chris Dixon
Summary:-
Therefore, the hacks in digital exchanges occur mainly due to lack of technical knowledge, improper guidance and less exposure to the world of digital currencies. Hence, we are required to implement better strategies to reach the maximum number of people and help them to understand the best use of digital exchanges
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