Security considerations for Crypto Exchanges - A guide

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    By Amee Mehta
    Jul 1st, 2020
    The crypto world is extremely dynamic. It’s constantly updating, changing, and improving. New exchanges and platforms are gracing the market every other day. But with such an unlimited choice, security becomes one of the most important factors. Higher the security of a cryptocurrency exchange, more will be the number of people who make use of it. So, through this article, we’ll look at two things:  - How to strengthen your cryptocurrency exchange security? - A checklist to make sure your crypto exchange is safe. While this article will focus a bit on the development side of things, it’ll also give you an idea of what features to look for when it comes to the best cryptocurrency exchanges, especially from a security standpoint. So, whether you’re a developer or someone looking to get a crypto exchange developed, by the end of the article, you’ll definitely have important takeaway points regarding the security of a crypto exchange! Starting with the first question:

    How to strengthen your cryptocurrency exchange security?

    There’s no better way to learn than from others’ failure. So, let’s begin from there.  In 2018, BitGrail, an Italian exchange, was involved in the loss of more than $170 million in Nano XRB tokens. The main reason that happened was because of the various security vulnerabilities in the exchange. As a result, the exchange was declared bankrupt. If only they’d taken security more seriously, none that would’ve happened.  Now, security is something that can be strengthened only by testing. It’s only through thorough testing that one can find out different vulnerabilities and make the required amendments.  To sum things up, you need testing if you have: - Created a fresh crypto exchange platform; - Embedded a new trading pair of cryptocurrency; - Outsourced or out-staffed your exchange development; - Doubts about the competencies of your developers; - Questions regarding the overall security of your application; - Used third-party apps and APIs in your exchange.


    Before you can go all guns blazing with testing, you need to know what exactly needs to be checked, and what are the most vulnerable points of your system. Here’s a list: 

    Authentication of user

    Ensure that the transmitted data (user name, password, or user email) cannot be hacked. How to make crypto exchange safe from attacks including DDoS attacks, data transfer, login vulnerabilities is what is answered in this. To ensure safety of data, the foremost thing to see is if the information is not publicly available. For login vulnerabilities, here are the items that need to be checked:  - Registration - Login - Password recovery - Session management

    Authorization of user

    This is aimed at ensuring that a user can access only a specific set of information/actions/pages, and that data is protected during transmission.  For the authorization checks at first: - Upload documents - Pass verification - Access the main part of the application

    Making changes to the user profile

    Tests for this should be aimed at how securely the user can change his profile information, including phone number, email, password, or even KYC documents.  Items to consider:  - Login - Edit profile - Change password - Delete profile - Safety of private keys and mnemonics.

    Security sessions

    Here, the tests are focused on checking the traffic and how to make a crypto exchange secure in case the data is transferred to the “outside world”: by email, to third-party services, etc.

    Transaction and user wallets

    Perhaps one of the most basic checks. This includes testing depositing and withdrawal of crypto assets, exchange of cryptocurrencies between wallets or inside a user wallet/account.  More often than not, withdrawal policies are associated around third-party services, so it’s important to ensure the data is transferred securely. Things to test:  - Deposit - Withdraw - Transfer or Exchanges

    Trading functionality

    For testing the trading functionality of your cryptocurrency exchange platform, you should take into account the commonly used assets, functions and pervasive vulnerabilities for this type of product, including: - Place an order - Cancel an order - Market overview - Play with Buy/Sell prices and orders

    Other third-party applications

    Sometimes platforms use third-party APIs for communication. In such scenarios, it is extremely important to protect your own system from their vulnerabilities. So, you need to make doubly sure that all the third-party applications or APIs that you’re using are safe and not harming your crypto exchange.  Above-listed were some of the most important checkpoints to consider for testing, in order to make your crypto exchange safe. Now, let’s take a more detailed look into the more important objectives!


    First of all, to make crypto exchanges safe, parts of the project like authentication and authorization mechanisms, the business logic of the application and session management, and other crucial items must be stopped from being bypassed.  This might sound like the most easy parts, but it’s extremely important for a safe crypto exchange. 


    Model the most used threats for the application. You should check that your crypto exchange can withstand DDoS attacks, SQL injections, and session stealing. Also, remember that developers often fail to foresee some actions that a user potentially may do.  So, the trick is to try and overdo everything. Escalate user privileges as much as possible to check the trustworthiness of your users, some may alter data or data presentation! 

    Breaking some rules

    cybersecurity for cryptocurrency exchanges
    There are three key points that we will talk about here.  First of all, user accounts. Hijacking is a frequently used system breach. Be sure to check that a particular user’s account can’t be hijacked by another user.  Secondly, performance and data integrity. Standard workflows and functionalities might not be under as much risk of being hacked, but they’re the parts most vulnerable to being bug-infected. So,, to maintain safety, you need to try corrupting each and every feature of the system.  Thirdly, limitations. The administrator may limit access or functionality for different users. Therefore violation of access controls becomes an essential part of the testing.

    Blockchain environment

    From a Blockchain POV, you need to check two things -- implementation-based Blockchain vulnerabilities and the safety of user-accessible components, that are based on cryptography. Now, with the most important things out of the way, let’s look at the next most important thing. A checklist for you to follow and ensure that the crypto exchange is safe and secure:

    A personal checklist for cryptocurrency exchange security

    As a thank you for reading through this post, here’s a checklist that you can follow to ensure utmost security of your crypto exchange.  To begin with, go through the basic user flow to ensure that everything’s going well. Here’s all that you need to test in this stage: - User registration - User login - Forgot password - Creation of wallets, deposits, withdrawals, and exchanges - KYC process -- like uploading documents, changing or deleting them. - Trading processes -- like creating orders, closing them, marketing them, etc. - Third-party request in APIs.  While testing, try to use test data for EACH system, and don’t work on the same test data.  Pro tip: The test data that you’re using should have a range of values from positive to negative tests.  Check security: - SQL or NoSQL injections. - Broken authentication routes. - Exposure of important sensitive data. - Access control issues. - Security misconfigurations.  Test loading. A crypto exchange is safe if it can withstand a high load. For this, you can use special tools to understand these capabilities of the system.  Therefore, your scope of work for a cryptocurrency exchange will include: 1. Grey-box security testing. This happens when a tester has a little information about the application, and has limited access to the system.. 2. API checking. This includes both internal and external APIs. Both your internal API and any external APIs. 3. Mobile testing if you are creating a mobile responsive app, or even separate mobile apps.

    In conclusion

    If you are a developer, we hope that our article will be helpful for you to answer the question how to make crypto exchanges safe. And if you are the exchange owner, or someone looking to get an exchange developed, we recommend you show this article to your QA engineers or contact our team of Blockchain experts!

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