If** 2017** teaches the world of digital currencies, it is that it has given it a lesson on security, especially as the huge number of breakthroughs throughout the year is worth millions of dollars of stolen money. I sent a clear message that digital currency trading needs to be reordered. What is the basis of these arrangements? It is making trading platforms decentralized.
2017 A year plagued by penetrations
It is likely that 2017 is the one who put the world of digital currencies on the map. However, weaknesses often come with attention, as it was the year of digital currency boom that led the industry into the hands of malice.
There have been many separate attacks throughout the year. These attacks from trading platforms to portfolio services to money from initial currency support (ICO) operations provide hackers with system vulnerabilities. By analyzing current market prices, we find that the total value of stolen funds during the year falls within the range of $ 500 million. This figure does not include even the pre-2017 breakthroughs, which included breakthroughs in the Bitfinex platform and Bitstamp, and the infamous "MTGox" that drove the market into recession. I add this to the bottom line and you will realize that over $ 12.5 billion of digital currencies have been stolen over the years.
Amidst the turbulence of the market, the governor also had a fair share of the breakthroughs. Last July, pirates hacked the "Parity" multi-fingered etherium purse, running away with 150,000** ATH** (about $ 200 million in the current currency). In November, a Tether governor lost nearly $ 31 million to attackers linked to the break-up of the Bitstamp platform in 2015.
However, in general, digital currency platforms bore the brunt of the burden of malicious activists in 2017, and South Korea's platforms were at the top of the piracy target list. The "Youbit" platform, previously known as "Yapizo", lost about 3,816 homes in April last year. Since it was approximately $ 5 million at the time of the breach, the total cost of the attack now exceeds $ 50 million. To make things worse, "Youbit" struck again in December, forcing it to file for bankruptcy after losing 17% of its money. Moreover, in July, the news reported that 30,000 user accounts on Bithumb, the largest trading platform in South Korea, had been exposed to data breaches leaving behind billions of stolen bullion coins. At current market prices, customers have suffered a collective loss of at least $ 10 million.
Decentralized trading platforms may offer an appropriate solution
All the stolen platforms like Bitstamp, Bitfinex, Youbit, Bittumb are central platforms. This is not unusual given that most major trading platforms are inherently centralized. There are reasons for this, and the most obvious is convenience, but these reasons often overlook security issues.
When a trading platform is centralized, this centralization comes in two forms: asset control and system management. With Asset Control, trading platforms work much like trusted institutions like banks. When you use a central trading platform, you agree to leave your money in the hands of the platform in private so that you decide to withdraw what you own. Trading platforms often retain client funds in their online and offline backup portfolios.
The other form of centralization refers to how Tadawul stores its data and the infrastructure it uses to support itself. Larger platforms are forced to outsource their cloud servers, such as cloud storage services, to accommodate the momentum of their location, which typically means allocating host servers in a single source.
Have you started absorbing the picture now? If an Internet pirate wants to hit a central trading platform, all it has to do is access from the central portal, which is usually the host server that forms the third party. Once inside, the pirate can access the central source of funds and the portfolio reserve of the online trading platform and its own keys.
There is no doubt that major trading platforms apply a number of security features in order to isolate themselves from hacker attacks. However, as has been shown earlier, such measures are not always sufficient. This is why we need decentralized trading platforms. It compensates for laxity that, because of its inherent design, the central trading platforms can not control. As such, decentralized trading platforms (abbreviated to "DEX") provide a number of enhanced security benefits:
No central point of entry and control
Unlike its central counterparts, decentralized trading platforms are not subject to a single entity. Although the domain server that people enter to use the trading platform is inherently centralized, there is no single entity that controls the market, and one server does not support this type of trading platform either.
At present, most decentralized trading platforms are based on the ethernet blockin, and are supported by a network of nodes rather than a central server. This means that the attacker has to break through half of the contract that supports the trading platform until it is controlled, which is practically impossible with any boasting.
Funds controlled by the user
Since there is no single entity that has a decentralized trading platform, there is no single hub that controls user funds. Hence, decentralized trading platforms do not depend on platform trust, meaning that users always control their assets while all trading is peer to peer. To achieve this, decentralized trading platforms manage currencies using smart contracts that operate in the etherium. Once the money is secured in an intelligent contract, a person who holds the corresponding private keys can only touch the money.
Under the central system, you give up your own keys, which are then collected into a single account book that reflects the online portfolio reserve of the trading platform. If a pirate puts his hand on these keys, he can steal your money completely. The decentralized system, on the other hand, will always control your own keys, and as long as you do not disclose them yourself to a malicious third party, your assets will be secure in smart decentralized platform contracts.
Integration with hardware wallets
This may be the greatest benefit that a decentralized trading platform can offer. So that decentralized platforms, such as Ether Delta and IDEX, can coincide with notebooks of account books such as Nano S and Trezo. In addition to storage in non-Internet portfolios, hardware wallets are the fastest-paced options for storing and managing personal funds, because they are immune to hackers and malware that can penetrate software portfolios. Using DEX-compatible wallets, you can access your "Ledger" or "Trezo" to send money directly to smart platform contracts. This is more desirable than manually entering your own keys, as manual access is always vulnerable to phishing attacks and keyboard monitoring.
Decentralized trading platforms still have a long way to go
While it is a better option than the most popular central options, decentralized trading platforms, with the mechanism in which they are currently operating, are far from perfect.
As EtherDelta taught us last December, it is still vulnerable to phishing attacks across the domain name server's trading platform. However, the security features inherent in the trading platform have softened the damage they have done. So that the accounts that used "Meta Mask" or "Ledger" are completely secure, even if customers use a fake site, and if you do not finally disclose your own keys on fraud, your money is safe on their smart contracts. At today's prices, over $ 500,000 worth of money has been stolen, although this figure is not funny, but it is certainly much less than what we have seen stolen from central trading platforms.
In order to talk more about the disadvantages of decentralized platforms, there is a reason why central trading platforms are more popular: they are easier to use. Newcomers may feel frustrated with the maze of smart contracts they need to review in order to start trading. Although you do not need to be involved or subject to verification in order to use a decentralized trading platform, you need to transfer money back and forth from your personal portfolio to the platform portfolio every time you want to trade. You are also at the mercy of the etherium network every time you want to transfer your money or do business. If the network is congested, it may at best experience higher transaction fees or, at worst, a system of coding, freezing and non-response problems.
A number of projects are considering the mitigation of these issues. For instance, "0x" applies an out-of-string ordering system in conjunction with a string-based trading system. In theory, this would give the decentralized trading platform this fast-paced system that conforms to the demands of the central trading platforms without sacrificing security. Blocknet is another trading platform that hopes to bring in changing exchange methods to streamline decentralized trade and make it even safer.
I believe that decentralized trading platforms have a future in digital currency trading, as they are essential to the financial health of the ecosystem and to future survival. I hope that the year 2018 will bring a great deal of innovation to this unmatched system, and I also hope that these innovations will help mitigate losses incurred under the current central standard.