Cryptocurrencies are the bank wallets of the future – for consumers and investors alike. But how can you launch a successful cryptocurrency or crypto-exchange and keep it secure against cyberattacks?
Cryptocurrencies get a lot of exposure in the media. Not all of it’s positive, for sure. But with this widespread publicity, they’re starting to become established in the public’s imagination: businesses and consumers are learning how to use these new currencies and exploring what value it can bring them. The cryptocurrency industry offers a fantastic opportunity for pioneering entrepreneurs, leading the charge at the beginning of a brand-new industry.
Go mining in the crypto hills
Let’s investigate the hype: In 2010, two people bought two pizzas for 10,000 bitcoins. Fast forward to 2017, and 10,000 bitcoins could feed an entire city with pizzas for several months – with an estimated value of $US 100 million. We don’t see that kind of exponential growth in cryptocurrencies today – in fact, the value of bitcoin has declined since its peak in 2017 – but there’s definitely still plenty of gold to be mined in them there crypto hills.
There are many different cryptocurrencies – bitcoin being just the most well-known one – and it’s still something of a ‘wild west’ out there. There are scams. There are flops. But mixed within these, a few will succeed and grow fast to become the ‘next bitcoin’. And we’re just at the start of this new economy.
Cryptocurrencies are going mainstream – with retail outlets like Microsoft and Subway now offering payment by bitcoin. In a recent Kaspersky survey, we found that 19 percent of consumers have starting to pay for things using cryptocurrencies. It’s booming in Asia – the continent of the cryptos – and starting to grow in North America and Europe too.
But some nations have already closed the shutters: cryptocurrency trading is banned in some countries, like India, as the government sees it as a risk to the country’s financial stability. That’s because it’s less regulated, and with less potential to regulate it in the future, plus it’s not secured by tangible assets like gold or silver. Limitations imposed at the government level could eliminate many larger professional incumbents from entering the market.
David v Goliath: taking on the big financial institutes
Cryptocurrencies represent the next big opportunity for financial investing: risk-taking individual investors are adding a little frisson and high-growth opportunity to their portfolio, and established financial institutes, who are looking to diversify and get a foothold into this new territory, are becoming cryptocurrency investors and establishing crypto-exchanges too. Cryptocurrencies are challenging the status quo of financial services. Established financial institutes are on the back foot: centuries of knowledge are no guarantee of success or attracting the confidence of investors. So there’s every opportunity for start-ups to compete and leapfrog ahead of the ‘old guard.’
We’re entering a brave new world where previously secure technologies that required complex and expensive operating systems are now being replaced by blockchain economy models: a new alternative to secure and distribute data, which will disrupt everything from buying a house to transporting vital medicines – or help you to authenticate luxury goods.
You can see this wealth of opportunities in the many start-ups who are launching crowd-sourcing campaigns to invest in their own ICO (initial coin offering) or STO (secure token offering). These are the more agile and affordable blockchain equivalents to an IPO.
ICOs and STOs – what are the security risks?
Investors see ICOs and STOs as a means of investing easily in a new breed of more agile businesses. But many people overestimate the level of protection of their funds, so it’s far from being without risk. The absence of professional finance advisors and enterprise-grade cybersecurity solutions enables cybercriminals to use public information for prospective investors to see which projects are raising funds and which are the most popular.
To raise funds for the ICO or STO, you need to write a smart contract. It’s a program on your cryptocurrency wallet that says ‘if you raise money from this person, execute X or Y logic.’ Cybercriminals can see vulnerabilities in the smart contract code and find a way to divert funds. This has created a bad reputation for ICOs. The community is trying to mitigate this by introducing security token offering (STO) campaigns. Any campaign originating from the token offering should be audited to review the source code by an independent and reputable supplier.
Crypto-exchanges – big numbers trading can carry big risks
Crypto-exchanges are big business: the monthly trading volume of some of the largest ones combined amounts to hundreds of billions of US dollars. It’s a temptation too big to ignore for many cybercriminals. They regularly target cyber-exchanges, and some attacks are successful. In the first half of 2019, at least seven attacks resulted in losses of tens of millions of dollars in each breach.
A crypto-exchange is, in general, a far more attractive target than an organization’s IT systems, which is likely to yield only customer or confidential data that then needs to be sold on the dark web to be turned into liquid cash. The history of data breaches against the biggest cryptocurrency exchanges shows that the cyber-risk is far higher for cryptocurrencies than other types of data-rich businesses, with a 51 percent likelihood of an attack or phishing.
How to secure your cryptocurrency business
Fortunately, cryptocurrencies use blockchain – a highly reliable way of making data immutable through distributed access, making hacking extremely complex. The blockchain technology is usually the strongest link in the chain: the weakest ones are every system built on top of it. High-profile cryptocurrency data breaches are usually the result of weaknesses in the IT infrastructure of the business rather than the data or service held in the blockchain itself.
Often, a start-up builds its own IT and financial systems, presenting a huge surface for attackers to penetrate. To make your system secure, focus attention on everything you build on top of the blockchain – like your accounting systems or currency exchanges. Although crypto-exchanges are a new technology, the security issues remain the same as for other IT systems: concentrate on strengthening your own infrastructure so you’re well protected if other businesses with weaker security join the blockchain. Plus, of course, protect against the ultimate weak link: employees and partners who may unwittingly give access to prospective hackers.
Investing in rock-solid security is a must. You should investigate options for specialist cybersecurity solutions for your cryptocurrency exchange. Additionally, make sure you have endpoint security that’s designed to support blockchain applications to protect against malware and phishing attacks.
Simple rule: protect everything. Be aware of the enhanced risks of new services, like distributed applications or smart contracts, which can be more vulnerable to exploitation. The more secure you can become, the greater the opportunities there will be for your cryptocurrency business to flourish.