Cryptocurrency trading bots: Strengthening Cybersecurity and minimizing risks
This blog was written by an independent guest blogger.
A staggering $1.9 billion in cryptocurrency was stolen by criminals in 2020, a recent report by Finaria reveals. Fortunately, despite the growth of the crypto market, crypto crime has decreased by 57% since 2019, dropping to $1.9 billion. The widespread recent implementation of stronger security measures also means crypto-criminals stole 160% more in value in 2019 than in 2020, despite the similar number of crimes. Now, crypto trading bots have become popular in the cryptocurrency world: software that automatically trades on exchanges on your behalf. Strengthening cybersecurity when using trading bots is key to protecting your accounts and money from hackers.
API security
While trading bots could just use your PC interface to make trades, having access to an API (short for Application Program Interface) key means they can directly access specific trades, which allows them to act quicker. The API key is basically a password your trading bot needs access to in order to operate, use your account, and make cryptocurrency orders. Most exchanges will need you to make an API key, but the exact steps involved vary on each platform. Additionally, you’ll need to make a secret key, which you must keep secret: if someone gains access to your API key and secret key, they’ll be able to trade on your behalf. API keys also have different configuration options that you’ll need to select, such as trade permissions, view permissions, and withdrawal options. You can enhance security levels by always deleting API keys once you stop using a trading bot.
Make sure your trading bot is secure and reliable
It’s important to research different trading bots to make sure the one you use is reliable and secure. Using a bot with bad software or an inadequately-coded algorithm has the potential to cost you money. Additionally, your chosen service should function smoothly; if it goes offline or stops working, you’ll again lose money. Research various bots and read reviews to find out how reputable they are. For example, Coinrule is known to include robust security features to protect data. Every user is given a private key with bank-level encryption, which is stored on a server located in segregated data storage for tighter security. Also, be careful never to allow your trading bot to withdraw currency. If criminals get hold of your API keys, this means they’ll be able to take money out of your bank account. Ensuring your bot isn’t able to make withdrawals means criminals will be limited to only being able to make bad trades.
Use multi-factor authentication
Using two-factor authentication (or 2FA) is an essential step that gives you an extra layer of security to protect against any potential hackers and attacks. When logging into your exchange with your username and password, two-factor authentication will require you to also enter a One-Time Password (OTP). This One-Time-Password will be promptly sent to your smartphone so you can finish the login process. Your One-Time-Password will either be HMAC-based (HOTP) or Time-based (TOTP). A HOTP password is valid for a longer period of time, while a TOTP password is only valid for 30 seconds, making it the more secure option. Two-factor or multi-factor authentication is well worth using, despite the hassle of having to perform additional steps.
Although cryptocurrency trading bots can save you valuable time by automatically analyzing market data and making trades accordingly, they do pose a level of security risk. Making sure your trading bot is as secure as possible by implementing API security, reading reviews before choosing a bot, and using multi-factor authentication is key to protecting your accounts and your money.