JuCoin Exchange: Building an Impregnable Security Defense for CEX from Multiple Dimensions
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JuCoin Exchange: Building an Impregnable Security Defense for CEX from Multiple Dimensions
JuCoin Exchange always adheres to the principle of "security first."
Navigating Web3 tides with focused insightsBuilding a security system for an exchange is a complex and continuously evolving systems engineering project. It requires multi-layered, defense-in-depth strategies to effectively mitigate risks and safeguard user assets. JuCoin Exchange has always adhered to the principle of "Security First." This article will use JuCoin as an example to analyze the construction and defensive practices of a CEX security system.
Core Principles of Security System Construction
JuCoin Exchange's security system is built upon the following six core principles, aiming to create a comprehensive, multi-layered security protection network:
- Defense in Depth (Defense in Depth): JuCoin employs multiple layers of security measures, establishing multiple barriers at various levels such as network, system, data, and application. Even if a single security layer is breached, other layers remain to provide protection, effectively increasing the difficulty and cost of attacks.
- Principle of Least Privilege (Principle of Least Privilege): JuCoin strictly controls the permissions of system users and processes, granting only the minimum permissions necessary to perform their functions. This effectively reduces security risks caused by privilege abuse or leakage, minimizing potential losses.
- Continuous Monitoring and Incident Response (Continuous Monitoring and Incident Response): JuCoin has established a 7x24 all-weather monitoring system to detect abnormal system behavior in real-time and has formed a rapid response team. In the event of a security incident, it can quickly locate, isolate, and remediate the issue, minimizing losses to the greatest extent.
- Security Audit and Penetration Testing (Security Audit and Penetration Testing): JuCoin regularly conducts internal and external security audits and commissions top international security firms for penetration testing. By simulating hacker attacks, it proactively discovers potential vulnerabilities and promptly fixes them, ensuring the system remains continuously secure and reliable.
- Compliance and Regulation (Compliance and Regulation): JuCoin actively embraces regulation, applies for licenses globally, and strictly adheres to relevant laws, regulations, and industry standards. Compliant operations not only enhance the exchange's credibility but also serve as a crucial cornerstone for protecting user rights.
- User Security Education (User Security Education): JuCoin continuously invests in user security education, raising user security awareness through various channels, educating users on using strong passwords, enabling two-factor authentication, etc., to jointly build a safer trading environment.
Key Technologies and Measures for CEX Security Defense—JuCoin Exchange Practices
JuCoin Exchange implements the aforementioned security principles into specific technologies and measures, constructing a multi-dimensional, comprehensive security defense system:
- Advanced Threat Detection Systems (Advanced Threat Detection Systems): JuCoin deploys AI-driven advanced threat detection systems, achieving all-around security protection:
- Real-time Monitoring: All-weather real-time monitoring of network traffic, system logs, user behavior, etc., to promptly detect abnormal activities.
- Behavioral Analysis: Utilizing machine learning and artificial intelligence-based behavioral analysis technologies to identify suspicious activities deviating from normal patterns, such as abnormal logins, large transfers, suspicious transactions, etc.
- Threat Intelligence: Integrating with globally leading threat intelligence platforms, such as AlienVault OTX, to obtain the latest threat information, timely update defense strategies, and address known and unknown threats.
- Intrusion Detection and Prevention Systems (IDS/IPS): Deploying enterprise-grade IDS/IPS systems, such as Fortinet, to detect and block malicious network attacks, such as DDoS attacks, SQL injection, cross-site scripting attacks, etc.
Smart Contract Security Audit (Smart Contract Security Audit): JuCoin subjects all used smart contracts to rigorous security audits to ensure code safety:
- Code Audit: Insisting on strict code audits conducted by top international third-party security audit firms to ensure the security, reliability, and compliance of contract code.
- Vulnerability Scanning: Using automated vulnerability scanning tools like Trail of Bits Slither to quickly detect known security vulnerabilities in smart contracts.
- Formal Verification: For key smart contracts related to core business, introducing formal verification technologies, such as Isabelle/HOL, to mathematically prove the correctness and security of contract code, minimizing risks to the greatest extent.
- Continuous Monitoring: After smart contract deployment, continuous monitoring is performed, and collaborations with security firms like PeckShield are established to promptly discover and fix newly emerging vulnerabilities.
Multi-signature Wallet Operation and Management (Multi-signature Wallet Operation and Management): JuCoin employs multi-signature wallet technology combined with strict management systems to ensure asset security:
- Multi-signature Principle: Multi-signature wallets require multiple private keys to jointly authorize transactions. Even if some private keys are leaked, attackers cannot transfer assets alone, significantly enhancing security.
- Key Management: The private keys for multi-signature wallets are stored separately in physically isolated HSM hardware security modules, safeguarded by core security team members located in different global locations. A comprehensive key management process has been established, compliant with the ISO27001 standard.
- Permission Control: Reasonably setting the signature threshold and permission allocation for multi-signature wallets. Critical transactions require 3/5 or even a higher proportion of signatures to execute, ensuring a balance between transaction security and efficiency.
- Operational Procedures: Establishing extremely strict operational procedures for multi-signature wallets, covering steps such as transaction initiation, multi-level approval, multi-party signing, and broadcasting. All operations are meticulously recorded and subject to security audits.
Cold and Hot Wallet Management (Cold and Hot Wallet Management): JuCoin implements an advanced cold and hot wallet segregated storage solution to maximize user asset security:
- Cold Wallet Storage: The vast majority of user assets (over 99%) are stored in physically isolated offline cold wallets. These cold wallets are physically disconnected from the network and monitored by dedicated personnel 24/7, significantly reducing the risk of hacker attacks.
- Hot Wallet Usage: Only a minimal amount of funds (less than 1%, far below the industry average) are kept in hot wallets, solely to support daily operations and user fast withdrawals. Hot wallets are deployed under a multi-layered security protection system, such as multi-signature, strict access control, real-time security monitoring, etc.
- Fund Transfer Process: Establishing bank-grade fund transfer processes between cold and hot wallets. Transferring funds from cold to hot wallets requires strict multi-level authorization and security audits, ensuring the fund transfer process is secure and controllable.
- Regular Audits: Independent third-party audit firms regularly audit the fund storage and transfer status of cold and hot wallets to ensure fund security and clear accounting.
Multi-signature Technology Implementation (Multi-signature Technology Implementation): JuCoin has always been at the forefront of the industry in implementing multi-signature technology:
- Technology Selection: Based on the specific requirements and security levels of different cryptocurrencies and business scenarios, flexibly selecting the most suitable multi-signature technology solutions. Currently, various advanced technology solutions are employed, including HSM hardware wallet-based multi-signature and MPC (Multi-Party Computation)-based multi-signature.
- Parameter Configuration: Based on risk assessment results, reasonably configuring multi-signature parameters, such as dynamically adjusting signature thresholds, number of keys, key types, etc., to achieve the optimal balance between security and usability.
- Secure Implementation: When implementing multi-signature technology, particular attention is paid to secure key generation, high-strength encrypted storage, off-site backup and disaster recovery, and comprehensive security design of the transaction process.
- Compatibility: During technology selection, full consideration is given to the seamless compatibility of multi-signature technology with the exchange's existing systems and business processes, ensuring that no new security risks are introduced while enhancing security, and optimizing the user experience.
Warnings from Major Typical Incidents
Looking back at the development history of cryptocurrency exchanges, several major security incidents have occurred, serving as a wake-up call for the industry:
Mt.Gox Exchange Theft Incident (2014): The largest early Bitcoin exchange, Mt.Gox, ultimately went bankrupt due to multiple theft incidents, warning CEXs that they must attach great importance to private key security and timely patching of system vulnerabilities.
Coincheck Exchange Theft Incident (2018): The Japanese exchange Coincheck was robbed of NEM coins, resulting in huge losses, once again emphasizing the importance of separating cold and hot wallets and multi-signature technology.
Binance Exchange Theft Incident (2019): Binance Exchange was robbed of 7,000 bitcoins, indicating that API security management is also an indispensable and important component of CEX security.
KuCoin Exchange Theft Incident (2020): KuCoin Exchange was robbed of a large amount of crypto assets, reminding CEXs once again of the need to continuously strengthen internal security management and supply chain security.
Since its establishment, JuCoin has never experienced any major security incidents, thanks to its unwavering adherence to the "Security First" principle, continuous investment of substantial funds and technical resources in building and constantly upgrading the exchange's security system.
Analysis and Reflection on the Bybit Crypto Asset Theft Incident
Recently, Bybit Exchange suffered a $14 billion crypto asset theft incident, once again triggering deep industry reflection on CEX security. Analysis indicates that this incident was likely an APT attack launched by the Lazarus Group (a North Korean hacker group), directly targeting Bybit's Ethereum multi-signature cold storage wallet. It has been called the "largest cryptocurrency theft in history," and preliminary analysis reports also point to Operational Security failure.
Possible Attack Process (Speculation):
1. Early Penetration and Malicious Contract Deployment: Attackers may have begun APT penetration of the Bybit Exchange system as early as February 19, 2025, or even earlier, lying dormant for a long time and deploying malicious contracts.
2. Locating Multi-signature Wallet and Replacing Contract: The attackers precisely located Bybit's multi-signature cold wallet storing a large amount of ETH assets and replaced Bybit's multi-signature cold wallet's Safe implementation contract with a pre-deployed malicious contract on February 21, which was the most critical step in the attack.
3. Key Leakage or Cracking and Multi-signature Authorization Bypass: The attackers may have previously stolen or cracked a sufficient number of multi-signature private keys. After the malicious contract replacement was completed, they exploited a backdoor function to bypass the normal multi-signature authorization mechanism, successfully transferring $14 billion worth of ETH and stETH assets from Bybit's Ethereum cold wallet.
4. Withdrawal Wave and Industry Mutual Aid: The Bybit Exchange theft incident caused market shock and user panic. Multiple exchanges such as Bitget, MEXC, KuCoin, etc., provided industry mutual aid, alleviating Bybit's liquidity pressure and market panic.
CEX Security Weak Points:
- Operational Security Risk is the Core Weak Point: The Bybit incident demonstrates that even with high-security technologies like multi-signature and cold wallets, operational security management vulnerabilities can still lead to catastrophic security incidents.
- Advanced Persistent Threat (APT) Defense Capability Urgently Needs Improvement: CEXs need to deploy more advanced, intelligent threat detection and defense systems, and establish professional security teams and APT attack and defense exercise mechanisms to effectively enhance defense capabilities against unknown advanced threats.
- The Complexity and Risk of Multi-signature Wallet Key Management Coexist: Multi-signature wallet technology enhances security but also introduces complexity in key management. Negligence or vulnerabilities in any link can introduce new security risks. One should not overly rely on the technology itself but must also focus on the implementation details and management of the technology.
- Internal Personnel Risk Remains One of the Greatest Challenges for CEX Security: CEX security is highly dependent on the professionalism, ethics, and security awareness of internal personnel. It is essential to continuously strengthen internal security management and establish a comprehensive internal risk control system to minimize internal personnel risk to the greatest extent.
Building a Safer CEX System: JuCoin Exchange's Multi-dimensional Security Enhancement Plan
To build an even more impregnable CEX system, JuCoin, based on its existing security technologies and measures, continues to enhance security in the following multiple dimensions:
Continuously Strengthening Advanced Threat Detection Systems:
- Deep Integration of AI and Machine Learning: Increasing investment in AI and machine learning, training more advanced threat detection models, enhancing threat intelligence analysis capabilities, and achieving more accurate identification and prediction of unknown threats.
- Building a More Comprehensive Security Information and Event Management (SIEM) System: Further upgrading the SIEM system, integrating more comprehensive security data, optimizing log analysis and correlation analysis algorithms, achieving centralized monitoring, intelligent analysis, and rapid response to security events across the entire platform, and reducing the Mean Time to Respond (MTTR) to security incidents to the minute level.
- Full Deployment of UEBA (User and Entity Behavior Analytics) System: UEBA systems have been fully deployed to monitor user and entity behavior patterns in real-time, automatically identify abnormal behaviors based on AI algorithms, and achieve proactive discovery and precise early warning of risks such as internal threats, account theft, and API abuse.
- Normalized, Realistic Red Team Exercise Mechanism: Making red team exercises a normalized security operation mechanism. Red teams composed of top global security experts simulate real hacker attack scenarios to conduct comprehensive, high-intensity penetration testing and practical validation of the exchange's security defense system, continuously discovering and fixing potential, deeper-level security vulnerabilities.
Continuously Reinforcing Smart Contract Security Audits:
- Implementing More Stringent Audit Standards: Implementing smart contract audit standards far above the industry average. Building upon existing code audits, vulnerability scanning, and formal verification, more advanced audit techniques such as Fuzzing and Symbolic Execution are introduced to achieve 100% code coverage testing for smart contract code, ensuring zero vulnerabilities and zero risks in smart contract code.
- Implementing "Multi-party + Cross" Audit Mechanism: Maintaining deep cooperation with top international security audit firms. For critical smart contract audit stages, innovatively introducing a "multi-party audit + cross-audit" mechanism to maximize the objectivity, comprehensiveness, and professionalism of audits.
- Establishing"Bug Bounty Program": Continuously operating and upgrading the "Bug Bounty Program," significantly increasing bug bounty amounts, establishing closer cooperation with the global white-hat hacker community, and building an innovative security defense system of "Global White-hat Hackers Co-building Security."
- Establishing"Smart Contract Security Vulnerability Rapid Response and Hot-fix" Mechanism: Establishing a 7x24 rapid response and hot-fix mechanism for smart contract security vulnerabilities, ensuring the entire process—from vulnerability analysis, fix plan formulation, code hot-fixing, security testing, to deployment—is completed within an extremely short time frame, reducing the average fix time for smart contract security vulnerabilities to the hour level, minimizing the risk of vulnerability exploitation to the greatest extent.
Continuously Optimizing Multi-signature Wallet Operation and Management:
- Comprehensively Upgrading HSM Hardware Security Modules: Comprehensively upgrading HSM hardware security modules, adopting next-generation HSM hardware with higher security levels and performance, and introducing multiple HSM hardware redundancy backup mechanisms to elevate multi-signature wallet private key security to the extreme.
- Innovatively Introducing"Key Sharding + Geographic Dispersion" Technology: Building upon Secret Sharing technology, innovatively introducing the concept of "geographic dispersion," dispersing key fragments of multi-signature wallets across multiple globally located, highly secure physical locations, eliminating private key leakage risks at the physical level.
- Constructing"Biometric + Hardware Token + Geographic Location Triple Identity Verification and Authorization Mechanism: Innovatively constructing a "Biometric + Hardware Token + Geographic Location Triple Identity Verification and Authorization Mechanism" within the multi-signature transaction process, elevating the security strength of identity verification and authorization to an unprecedented level.
- Building"Full-process Traceable, All-around Visual, Fully Automated Intelligent Security Audit Log and Monitoring Platform: Heavily investing in building a new-generation security audit log and monitoring platform, achieving full-process recording, all-around visual display, fully automated intelligent analysis, and real-time risk warning for all operational logs of multi-signature wallets, realizing all-around security auditing and monitoring with "pre-event warning, in-event blocking, and post-event tracing."
Continuously Improving Cold and Hot Wallet Management Plan:
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Introducing "AI-driven Dynamic Cold and Hot Wallet Intelligent Balancing System: Innovatively introducing an "AI-driven Dynamic Cold and Hot Wallet Intelligent Balancing System." Based on AI algorithms, it predicts key indicators such as exchange trading volume, user withdrawal demand, and market volatility risk in real-time, dynamically and intelligently adjusting the fund ratio between cold and hot wallets to minimize the fund storage ratio in hot wallets to the greatest extent.
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Exploring"Fully Automated, Zero Human Intervention Cold and Hot Wallet Fund Transfer Technology: Under the premise of ensuring absolute security, actively exploring "Fully Automated, Zero Human Intervention Cold and Hot Wallet Fund Transfer Technology," for example, utilizing cutting-edge technologies such as Trusted Execution Environment (TEE) and Multi-Party Computation (MPC) to minimize risks potentially introduced by manual operations.
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Constructing"Multi-dimensional, Three-dimensional, Intelligent Linkage" Hot Wallet Security Protection System: Constructing a "Multi-dimensional, Three-dimensional, Intelligent Linkage" hot wallet security protection system. For example, on the hot wallet server side, deploying dozens of security protection technologies and security devices, and intelligently linking all security devices and systems to achieve the highest security protection level of "Single-point Threat Trigger, Full-platform Coordinated Defense."
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Building"Same-city + Off-site + Overseas" Three-location Multi-active Disaster Recovery Centers: Building a "Same-city + Off-site + Overseas" three-location "Multi-active" data center and disaster recovery system, achieving real-time synchronous backup and second-level switching of all critical data, ensuring that exchange operations can continue stably and securely under any extreme circumstances.
Protecting Crypto Investor Asset Security: The Ultimate Mission of JuCoin Exchange
Building the world's safest and most trustworthy cryptocurrency trading platform, maximizing the protection of crypto investor asset security, is JuCoin's eternal and unchanging original intention and mission. JuCoin will continue to invest massive resources, constantly innovate security technologies, iterate security systems, optimize security processes, and strengthen security management, unwaveringly building the most impregnable security line of defense for global crypto investors. This ensures that every user who chooses JuCoin can truly trade crypto assets with peace of mind, confidence, and security, jointly embracing the bright future of cryptocurrency.
Summary
CEX security construction is a systems engineering project without an endpoint, continuously evolving. It requires ceaseless learning and innovation, continuously integrating and adopting the most advanced security technologies and best security practices. JuCoin Exchange will persistently uphold the principle of "Security First," continuously improve security protection capabilities, and provide users with safe, reliable, and trustworthy crypto asset trading services.
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