Cryptocurrencies have been on the rise in recent years. This is true for their value and their place in the world of online finance. Crypto is now more widely accepted than ever by some institutions that are traditionally skeptical towards new tech – such as banks and stock markets.
With that many new investors interested in purchasing crypto, it’s important to get educated on the matter and to remain safe while using crypto exchanges. In this article, we’ll outline the main features of a crypto exchange and what to look for in one.
A Properly Registered Exchange
The best way to buy Bitcoin is to use a properly registered crypto exchange that has all the required licenses. This way, you can be sure that the exchange follows the regulations in the country it’s based in and that there’s a system in place to ensure the payments are made.
Unregistered exchanges are out there, and they usually offer some outlandish profits. It’s best to stay clear of these even if the offer sounds great. In most countries, the exchanges are run by the same government agencies that manage the work of foreign currency exchanges.
Reputation Matters
Reputation matters in the world of crypto exchanges. There are countless exchanges out there, and some smaller ones always provide lower fees and better terms. However, reputable exchanges are usually the safest ones.
Investors should take the time to investigate how reputable the exchange is, how many users it has, what its trading volume and how long it’s been operational.
Having a Strong Password
In most cases, investors need only an email account and a password to access and use a cryptocurrency exchange. They will also need a picture ID to set up the account for the first time. It’s, therefore, essential to carefully choose a password to keep your account safe.
General rules apply – the password should be unique for every exchange you’re using. It should contain special characters, capital letters, and numbers. Most advanced users generate a password using a tool made for it. Such apps can also store and save passwords so that players don’t need to rely on memory alone.
Use Two-Step Authentication
Most, if not all, crypto exchanges use two-step authentication. This is a security measure used to prevent accidental and erroneous transfers. The concept is simple – users must authenticate their transfers in two steps. This is mainly done by confirming the transaction on two different devices.
Exchanges usually send a code the user needs to enter using a mobile device. The code can be sent as a text message or as an email. That way, transactions can’t be made if one device is compromised somehow.
Keeping the Device Secure
Crypto exchanges can be used on mobile and desktop devices alike. All of the desktop version features are available on an app – including making purchases and transfers. Regardless of which device the investors are using, they need to take steps to keep them secure.
The rule of thumb is that you shouldn’t install any apps you don’t trust or know on a device that you plan to use to access crypto exchanges. Installing VPNs and access exchanges only while your IP is protected and hidden is also useful.
Crypto Wallets
Most crypto exchanges offer a way for the users to keep the currencies they’ve purchased. This is usually done with online crypto wallets offering a certain protection level. The investors can choose between using these wallets and investing on their own with better security features.
The decision mostly depends on how many crypto assets you will hold in an exchange. For large amounts, having a cold crypto wallet of your own is the best way to go. Cold wallets can’t be hacked as they are not connected to the internet.
The Dangers of Cross-Site Scripting
Cross-site scripting (XSS) is online merchant sites’ most common security issue and can also affect crypto exchanges. Malicious actors can sometimes steal the users’ credentials and personal data and even take over their accounts. Attackers can then perform actions on behalf of the users, such as making trades or withdrawing funds.
There are numerous actions that a crypto exchange can take to prevent these attacks. These include sanitizing user inputs and encoding output to prevent the execution of malicious scripts and performing regular audits to find vulnerabilities. The exchanges are usually open about the security measures they take, and investors should familiarize themselves with them before using them.
Anti-DDoS Security Protocols
Distributed Denial of Service (DDoS) attacks are malicious attempts to disrupt the regular functioning of a network, service, or website by overwhelming it with a flood of traffic. Crypto exchanges need to have measures put in place to prevent such attacks.
This is done by distributing the DNS service across multiple servers, identifying and blocking traffic from suspicious IP addresses, and implementing rate limiting. That way, a user that makes too many requests during a short period gets blocked before overwhelming the network. The matter is often too technical for an average crypto exchange user, but it’s one of the most important security features the exchange can have.
Transfer Notifications
Crypto exchanges need to provide their users with a system that allows them to keep track of the transactions. One of the essential features that investors should insist on is getting a notification every time a transfer is made to and from their account. That way, no purchase can be made by accident, even if an investor makes dozens of trades a day.
It’s also useful to establish a practice of going over transactions on a regular basis. This is especially true for investors who buy and sell a lot of different currencies of different sizes and values. Most exchanges offer such a service by providing a report for their users.
Investigate the Cryptocurrencies
Trading cryptocurrencies isn’t always about buying the currency that’s on the rise and selling it for profit. This is the basic principle behind every investment, and it can be a way to earn on crypto exchanges. However, a cryptocurrency is an asset with a user base and a set of features.
The investors are buying this asset and its potential rather than just the profit margin it comes with. It’s often said that an investor is buying companies and not shares on a stock market, and the same logic applies here. Choosing cryptocurrencies this way is much more challenging as it requires more research, but it leads to better decisions.
Conclusion
Cryptocurrency exchanges allow investors to trade crypto easily, similar to trading in foreign currencies. There are countless currencies to buy and sell and a few hundred active and safe exchanges. Investors need to carefully choose an exchange that’s safe to use and protects the users and their personal information.
Exchanges should have two-step authentication systems, distributed denial of service protocols, cross-site scripting, and cold wallets. It’s equally important to keep the device you’re using to trade safe from online threats – this can be a mobile device or a computer. In the end, the only safe way to buy and sell crypto is via licensed exchanges.
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