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Protecting crypto transactions: advanced security solutions driving market confidence

Protecting crypto transactions: advanced security solutions driving market confidence

Security is paramount for consumers and businesses in the growing cryptocurrency market. In 2024, hackers stole almost $1.5 billion, refocusing their efforts on targeting centralised exchanges like the Japanese exchange DMM.

The need to ramp up security and protect the crypto community has become even more significant as new users flock to the industry after President-elect Donald Trump declared his pro-crypto stance and pledged to ease crypto regulations. There's been a market surge as Bitcoin hit $ 100,000 and investor confidence soared, and with institutional investment likely to increase, thanks to the likelihood of an improved regulatory environment, it's critical that crypto platforms improve security to demonstrate their commitment to protecting their customers.  

 

Increasing user confidence must be the number one priority 

Research carried out by CoinCover shows that 50% of non-crypto users would invest in crypto if they were confident that their assets were secure.  Organisations must prioritise user confidence and demonstrate their commitment to keeping customer funds safe, to build the industry's reputation and attract new investors.

Reducing fraudulent activity and promoting fair trading practices helps stabilise the market, and makes it more attractive to potential investors. Increasing confidence is also critical for platforms to retain and grow users, as they are likelier to stay with and recommend platforms they trust.

 

Industry action 

The good news is that crypto service providers are already prioritising security to encourage broader crypto adoption. The industry has developed best practices that have become standard across many organisations, improving user trust and confidence, including: 

 

1. Robust security protocols 

Secure coding practices and advanced encryption methods protect wallets from hacking and data breaches, while multi-signature and multi-party computation (MCP) wallets protect users by giving multiple parties control over the wallet so a single person can’t make transactions unilaterally. 

 

2. Multi- (MFA) or two-factor authentication (2FA) 

Locking down access to accounts adds an extra layer of security, making it harder for hackers to gain access. Crypto businesses are using multiple layers of authentication to secure accounts. 2FA uses two different items to verify someone’s identity, for example, a password and security code (think signing into an Apple account on a new browser). MFA uses more than two authentication methods, adding in something like facial recognition on top of a password and a code.  

 

3. Security audits  

Organisations carry out frequent security audits on their code and systems to identify and address vulnerabilities before they can be exploited. They also implement security frameworks such as SOC II and ISO27001, ensuring their customer data is managed effectively, and their controls meet audited criteria.

 

4. Cold storage  

Cold storage wallets reduce the risk of attack by storing private keys and funds offline in secure vaults. With no access to the internet, cold wallets are not exposed to vulnerabilities that affect online (hot) wallets, like software exploits. 

 

5. Regulatory compliance 

Savvy organisations are getting ahead of the competition by engaging with regulators, like the USA’s Securities and Exchanges Committee (SEC) and the Financial Conduct Authority (FCA) in the UK and gaining regulatory status or licencing.

By implementing standards that exceed regulatory demands, crypto businesses are enhancing transparency and trust among users who are used to the protection given by traditional financial institutions (the USA’s Federal Deposit Insurance Corporation and Financial Services Compensation Scheme, both of which protect deposits up to a certain amount per person).

 

6. User education 

Often, security breaches are due to simple mistakes like forgetting a password or not storing a seed phrase safely. People can also be tricked into handing over information to hackers who use it to access their accounts. The crypto industry has gone to great lengths to educate users about security best practices, such as recognising phishing attempts, using strong passwords and storing them in password managers, and making accounts more secure with 2FA.

 

7. Insurance coverage 

Offering insurance for digital assets can provide additional protection and reassurance for customers, but can be prohibitively expensive for many organisations. High-profile and preventable hacks have damaged the industry’s reputation, and as a result, insurance premiums have risen disproportionately. 

 

CoinCover’s Transaction Protection uses a multi-layered screening solution that evaluates blockchain transactions, our risk engine identifies legitimate and suspicious transactions, notifying users of potential threats in real-time.
 
And here’s the kick. Not only do we prevent hacks and losses from happening, but we also offer a unique financial warranty that compensates for losses should our technology fail or our customers suffer malicious attacks. The technology is insured through Lloyd's of London, ensuring verified transactions are protected against fraud and human error.
 
The result? Our advanced transaction monitoring product not only checks your transactions up front, but if we miss something, we’ll compensate you or your customers, so you are completely protected. And because we’re protecting at a transaction level, costs are lower compared to organisations that choose to insure their entire assets under management.

 

8. Organisation-specific security 

Some organisations go further to improve security. Coinbase, for example, holds customer assets on a 1:1 basis, so whatever amount the user deposits, Coinbase holds the same in reserve to match the deposit. It means that the user will always be able to withdraw their funds.

Ledger, a leading provider of hardware wallets, has partnered with CoinCover to provide their customers with an ultra-secure recovery phrase backup service. The collaboration highlights Ledger's dedication to providing secure and reliable services to their users.

 

Security trends impacting the crypto retail market   

As the industry grows, so does the need to improve security for investors. Businesses and individuals must understand how to safeguard their assets and mitigate their risks. There is a range of security techniques that are used to protect assets.

 

1. Advanced machine learning and real-time threat monitoring  

These technologies detect and prevent fraudulent activities by monitoring and analysing transactions, ensuring that any suspicious activity is flagged and addressed in real-time. Machine learning algorithms analyse vast amounts of data to identify patterns and anomalies that indicate fraudulent behaviour. Taking a proactive approach, the technology helps mitigate risks before they cause significant harm.

 

2. Device fingerprinting and behavioural analysis   

Tracking device usage and analysing user behaviour helps organisations to identify and mitigate potential threats. For example, technology detects new or unrecognised devices attempting to access accounts, then checks with the account owners to make sure it's actually them using the device. Behavioural analysis can identify unusual activities, like multiple login attempts from different locations, which may indicate a compromised account.   

Device fingerprinting adds an extra layer of security. It creates a unique identifier or fingerprint by collecting information from the devices that users usually use to access their accounts, then uses that information to detect unusual behaviour and question it.

 

3. Scam detection and prevention  

Advanced scam detection systems have been developed to help stem the rise in cryptocurrency scams. They use databases of known scam wallets and ransomware-linked addresses to identify and block fraudulent transactions. By staying ahead of scammers, businesses can protect their customers and maintain their trust.

Scam detection tools, like CoinCover’s Transaction Protection, include monitoring the blockchain for suspicious activities and risk-scoring transactions, as well as providing investigation tools that trace the flow of funds and recover stolen assets.

 

4. Compliance with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations  

The introduction of regulation into the crypto industry, particularly in relation to AML and CTF, is driving the adoption of transaction monitoring solutions. Compared to traditional finance systems, crypto offers anonymity that is attractive to criminals. Although transactions are recorded on a public ledger, people can remain anonymous using pseudonyms and the blockchain to move dirty money. Criminals also mix their crypto with others to obscure the origin and destination of their funds and buy goods or services from legitimate businesses.  

Regulation is forcing crypto organisations to put measures in place to detect and prevent illegal activities, protect the crypto community from fraud and scams, make investing in the industry safer, and drive trust and broader adoption.

 

How does Coincover protect transactions for the retail market?  

CoinCover is at the forefront of security in the crypto industry. Since 2018, we have been providing disaster recovery and transaction monitoring services. For the past eight years, our comprehensive approach to risk management has helped over 600 businesses secure their digital assets and protect themselves against potential financial losses due to fraud or technology failures.

We protect against these risks by combining real-time monitoring, scam detection, and the catch-all warranty unique to CoinCover's customers.

 

Real-time monitoring  

Our system continuously monitors transactions, identifying irregular patterns and flagging suspicious activities such as velocity attacks, geographic inconsistencies, and significant value changes over a short period. Real-time monitoring ensures that any suspicious activity is detected and addressed promptly, reducing the risk of financial loss. In 2024, we’ve monitored over $24bn of transactions.

 

Scam detection  

Our dynamic scam detection system uses a database of scam wallets and ransomware-linked addresses to identify and mitigate threats. By proactively identifying and blocking scam attempts, we help protect our customers from falling victim to fraudulent schemes.

 

A comprehensive warranty  

Our warranty compensates customers for financial losses due to technology failures or unauthorised transactions, providing security and minimising liability. It's a financial safety net that reassures customers that their investments are protected from unforeseen losses and attacks.

 

Seamless user experience  

Customers can confidently engage in cryptocurrency transactions using our secure and reliable platform, knowing that CoinCover's advanced security measures protect their assets. We give customers the option to approve or reject a transaction that we’ve identified as anomalous, in real time and before it is signed.

 

Conclusion

The need for robust security measures will only increase as the cryptocurrency market grows. CoinCover is committed to staying at the forefront of this evolving landscape, providing innovative solutions that address the unique needs of all crypto users. Whether you are a retail investor or a business looking to protect your customers, you can trust CoinCover to safeguard your digital assets and provide peace of mind.

Discover how CoinCover can help your company thrive in a dynamic market while safeguarding your customers. Contact us today to learn more.

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