Digital asset exchanges provide institutional investors with a convenient avenue for buying, selling, and trading all kinds of cryptocurrencies. As such, the creators of these platforms must diligently use state-of-the-art technology to keep user data, privacy, and customer currencies secure.
Hackers can exploit the slightest weaknesses in digital asset exchange technology. In 2018, the Tokyo-based exchange Coincheck experienced the largest crypto hack in history, losing more than $500 million in cryptocurrencies to hackers.
If you want to avoid this outcome, it’s essential to realize where your digital asset exchange infrastructure is falling short. This guide will help you determine how to upgrade your digital asset exchange technology and reduce its technical vulnerabilities.
The first step in updating a digital asset exchange is finding its current weaknesses. Pinpointing these vulnerabilities can help boost the operational efficiency and security measures of your system.
Ultimately, you’ll need to assess the weaknesses of your exchange’s hardware and software. This can be done by analyzing user behavior, feedback, and data. Let’s explore how to conduct a comprehensive system audit in detail below.
Poor system performance can hamper the reputation of your business and push potential customers into the arms of your competitors. For this reason, you should closely monitor key performance metrics such as transaction speeds and server response.
Both indicate the digital health of your platform and its ability to deliver world-class financial services without any interruptions.
If you’ve built your digital exchange software from the ground up, it can be difficult to review extensive performance analytics without building an add-on solution. With AlphaPoint, you can rely on our battle-tested digital asset exchange technology and platform performance monitoring for a variety of ongoing analytics to ensure smooth operations, security, and to make informed business decisions.
In addition, AlphaPoint monitors client production environments in real time, alerting on numerous potential concerns and providing 24/7/365 support in areas like KYC, AML, and 2FA.
Keeping customer data and privacy safe isn’t just ethical, but it’s also a legal requirement for crypto businesses in major countries like the United States and the UK.
To promote rigid cybersecurity measures, your digital exchange will need to undergo both internal and third-party security assessments. The purpose of these assessments is to gauge the risk levels of your own software and that of your affiliates.
With that said, here are some things to keep in mind when running a security audit:
When it comes to online security, failing to plan is essentially planning to fail. It’s important to stay proactive in performing both manual and automatic system reviews to eliminate vulnerabilities immediately.
Studying user behavior and trends is pivotal in making data-driven decisions about the current standing of your digital asset exchange. Fortunately, there are several tools you can use to derive insightful data and metrics about the performance of your software.
Some of the best user testing tools are:
Using any of these tools will help you track user behavior and make data-driven decisions to give them the best possible experience.
Blockchain technology is commonly used in digital asset architecture. Thus, it’s essential to stay ahead of the latest blockchain innovations to keep your systems up to date.
In fact, incorporating modern blockchain technology can significantly improve transaction speeds, reduce costs, and enhance scalability. Here are some ways you can use established and emerging blockchain technologies to augment your software:
The most successful digital asset exchanges thrive because of quick transaction speeds. This ensures that customers are able to change positions in little time, which is a positive for the entire crypto ecosystem.
To deliver quicker transaction speeds, you should consider switching to newer blockchain technologies like Solana or Polkadot. Both are significantly faster than Bitcoin, offering lightning-fast network speeds with lower fees.
Modern blockchain technology contributed to the popularity of decentralized storage. This storage method enables users to store data across various nodes in a distributed network.
Unlike centralized data storage, sensitive data is fragmented to enhance data security, privacy, and scalability. As a result, fragmentation spreads data across multiple servers to reduce overloads and improve load balancing.
Digital asset exchanges can leverage the InterPlanetary File System (IPFS), a decentralized peer-to-peer (P2P) file-sharing system, to scatter sensitive data across a secure network.
As your exchange begins to grow, you may need to direct excess transactions off the main blockchain to increase network speeds and eliminate congestion. One way you can do this, without compromising network security, is by leveraging layer-2 solutions.
Layer-2, or a data link layer, is any off-chain network that’s built on top of a blockchain. In doing so, the blockchain can scale to manage rampant transactions and keep user data secure. Two of the most well-known layer-2 solutions are:
Increasing the number of transactions across your blockchain network is an indicator of business success. It’s important to manage this success by utilizing layer-2 solutions to keep your networks efficient and secure.
An excellent digital asset exchange platform combines a world-class user interface (UI) with adherence to local and global compliance standards. Simply put, the best digital asset platforms are both visually appealing and legally compliant.
Here are some tips to strike a balance between user-friendly features and rigorous security protocols:
To maximize user engagement, digital asset exchanges should utilize a functional and aesthetically pleasing UI. Here are some ways you can build a UI that delivers an exceptional experience to your customer base:
Focusing on these core areas is pivotal to developing a user interface that meets your organization’s performance goals.
Crypto governance standards change every year. Depending on your jurisdiction, you may be subject to varying compliance standards. As such, it’s essential to stay on top of compliance updates to reduce your legal liability and uphold your business’s reputation.
Setting up alerts from financial regulatory bodies in your region can help you avoid non-compliance. For example, the most prominent financial regulatory bodies in the U.S. are:
In the U.K.:
In the EU:
In Australia:
Many of these governing bodies provide subscribing opportunities so financial institutions can receive around-the-clock announcements and updates.
An intuitive UI isn’t just aesthetically pleasing. A digital asset exchange should employ advanced verification processes to prevent fraud. To accomplish this goal, you can integrate anti-fraud mechanisms, such as:
With these defense protocols in place, you can protect customer data, maintain rigid compliance, and uphold financial transparency.
Businesses use the cloud for all kinds of operations, from disaster recovery to software development. For a digital asset exchange, cloud computing offers a scalable and efficient means of launching the entire platform.
Instead of buying and owning multiple data warehouses and servers, you can operate an entire web application using cloud computing. There are three types of cloud computing models available:
The right model for you will ultimately depend on your business needs. For example, a startup may choose public cloud computing as a more affordable solution. On the other hand, a massive crypto trading platform may choose a private cloud network to receive near-unlimited bandwidth.
Before investing in these services, here is everything you need to know about cloud computing:
Cloud services eliminate the need to purchase massive computational infrastructure. Because computer resources are distributed over an internet connection in real time, digital exchanges can scale their businesses more efficiently.
In addition, cloud services are faster than traditional computing services. This allows digital asset exchanges to better manage sudden traffic spikes and unprecedented business growth to expand their market reach.
Not all cloud providers are created equal. Thus, when choosing a cloud provider, you should factor in criteria such as:
On top of that, it’s best to select a provider that aligns with your operational requirements and geographic location.
Your cloud partner should be committed to preventing data breaches and maintaining user trust. To this end, they should offer industry-leading encryption, multi-factor authentication (MFA), and regular security audits to keep your data safe.
The top cloud computing providers publish their stance on web security on their websites. For example, Amazon Web Services provides in-depth information about its security solutions, as well as testimonials that prove its value.
The importance of maintaining an efficient and secure digital asset exchange can’t be overstated. With AlphaPoint, you can get a robust, battle-tested platform that continuously evolves to meet the ever-changing standards of the global financial industry.
AlphaPoint’s features include enhanced trading engines, liquidity solutions, and improved wallet security. We’re a proven name in the digital asset market, having developed digital asset software for El Salvador and other large financial institutions such as Wenia in the Latin American region.
The press secretary of El Salvador praised our services, saying, “The prestigious American company AlphaPoint has joined the effort to provide more technology and security to Chivo Wallet, allowing for financial access support to be even more effective.”
If you want to see how AlphaPoint’s technology can meet your specific needs, request a demo today.
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