Fri, March 29, 2024

A New Cryptocurrency Exchange That Cannot Be Hacked?

Netwalker and Crypto-related crimes

Since the beginning of cryptocurrency trading, which began in the early 2010s, Bitcoin exchange hacks have haunted the original trading platforms. These hacks caused public relations concerns for the crypto asset market. These hacks are independent of the Bitcoin network and any underlying technical issues. But experiencing losses of millions of dollars in Bitcoin in minutes is not a good look. Stealthy hacks constitute a significant concern for investors.

Although the dangers of large hacks are always on the horizon, the Bitcoin exchange industry has enhanced its capability and methodology of dealing with crypto asset security.

Developers have uncovered modern ways to build exchanges that allow users to delay turning over their funds until the particular moment they decide to conduct a trade. Nash is the name of one of the new exchanges that are adopting this technology.

How Nash Protects Customer Capital

With previous exchanges, trading platforms required consumers to deposit their coins. This allowed the exchange to take charge of the funds. However, this became a perfect concentration of coins for hackers. When they manage to hack into an exchange’s internal wallet, hackers are victorious, leaving investors with nothing.

The platform structure that Nash has allows customers to have full control and guardianship over their crypto assets. Nash does not require users to give their assets to third parties before trading.

Lightning Network’s capability to improve the promptness of transactions, cut costs, and enhanced user privacy have Bitcoin supporters excited for the future. Nash implements a system that handles trades through state channel smart contracts. Both Neo blockchains and Ethereum currently use this system as well. Recently, Ethereum blockchain managed to exceed Bitcoin in an essential part of adoption.

Nonetheless, over the past few years, ETH token has been down against Bitcoin. The co-founder of Nash, Fabio Canesin, stated that they have scheduled to add Bitcoin support to their security platform.

How Does It Work?

Multiple parties can transact with one another without touching blockchain by using state channels. Effectively, this is possible through a technical trick that requires two parties. Both parties deposit funds into a 2-of-2 multisig address. Following this, performed valid transactions from that multisig address are sent to their respective personal accounts. This is a way to inform each party how much of the fund in the multisig address belongs to them. 

To protect privacy, the blockchain does not announce transactions. In the end, each party is ready to leave the payment channel with their allotted amount. Following this, the transactions appear on the blockchain.

A key advantage of utilizing state channels is the swiftness of the exchanges. Although decentralized exchanges did exist, today, state channels provide instant transfers. The result is that consumers execute trades immediately, and no longer have to wait for minutes for blockchain to confirm their exchanges.

However, while funds deposited by the consumers cannot be stolen through hacking an exchange’s internal wallet, there is still damage that can be caused. Hackers can go as far as using malignant software updates. The cryptocurrency ecosystem is not fully protected, but it is still a step in the right direction in mediating security.

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