Top3 API Key Security Tips You Should Know for Crypto Trading

2023/06/28 14:29:28

Security should always be the #1 priority of any crypto trader and investor. While using API keys to automate trading or portfolio tracking is generally a good idea, you need to make sure you are using the keys in a safe manner. It's important to consider API key security when choosing a trading platform, in addition to the availability of a wide range of trading products and reliable exchanges.

Similar to disclosing your bank account password, sharing these secret keys creates a vulnerability that some can exploit, potentially resulting in the loss of money and private information.

Because user security is a top priority at KuCoin, we've started the #ThinkBeforeYouInvest campaign, your one-stop security education hub. Before investing in crypto projects, stay informed, be aware of scams, do extensive research, and give security the highest emphasis when trading!

What Is an API Key?

You need to know what an API is in order to fully understand what an API key is. A software intermediary that enables information sharing between two or more applications is known as an application programming interface or API.

Application Programming Interface (API) keys are a useful technique to provide specific applications access to user data so they can act on the user's behalf. An API key is a string of code used by an API to asses who is using the API, and how.

The public key and the private key are the two crucial components of a set of API keys. These can also be referred to as the secret key and the public key.

The program will sign requests made for access to a trader's account using the private key. By doing so, the software informs the exchange that it is authorized to access the traders' exchange account and carry out the actions enabled by the API key.

If you do not secure your API keys, you could fall victim to phishing attacks or other exploits and lose funds in that way. More on common API key abuses later on.

Why Do Crypto Exchanges Use API Keys?

An Application Software Interface, which consists of an API Key, API Passphrase, and API Secret Key, functions as a sophisticated login and password system that enables the software of your choice to "communicate" with your trading exchange or wallet. Users' identities and the accounts that an automated program is accessing are verified using API credentials.

The application will utilize a secret key to sign requests when a trader seeks API access to his account. By doing so, the application notifies the exchange that it is authorized to access the traders' exchange accounts and carry out activities that are permitted by the key.

Companies are providing more tools and services to help crypto users get the most out of their trades as the market for cryptocurrencies grows. Trading professionals can open orders without logging into a cryptocurrency exchange by using API keys, which automatically access their exchange account.

Cryptocurrency traders often employ third-party platforms to place trades automatically, manage their assets, perform arbitrage, save account information, and put other intricate trading techniques into practice.

It is important to note that each cryptocurrency exchange has distinct API keys that allow users to manage their accounts in various ways. Placing orders, gathering account data, and gaining access to market data are some of the exchange API's most frequently used features.

How do I Get My KuCoin Exchange API Key?

You can easily create an API key on the KuCoin exchange by just following these steps:

Step 1: Log in and then click your avatar in the upper-right corner of your screen. This will bring up the drop-down menu. From there, click on "API Management."

Navigating to the API Management Page

Step 2: You will then be brought to the API Management page. From there, navigate to the API creation page by clicking on "Create API."

Starting the API Creation Process

Step 3: You can select either API Trading or Link Third-Party Applications in the popup that displays, and enter the API name and API passphrase.

API-Based Trading Tab Overview

Step 4: If you want to link a third-party service, select the name of the app you want to link.

Third-Party Application Linking Tab Overview

Step 5: Input your API name and passphrase and select API permissions. Be aware that when linking the third parties, withdrawals are not available for safety reasons.

Step 6: When your security verification pops up, enter your trading password, the verification code you received by e-mail, and the generated Google verification code. Clicking “Confirm” will then finalize your API creation.

Final Security Verification

Can API Keys Be Stolen?

Naturally, having your API keys exposed or stolen by cybercriminals can result in catastrophic consequences. With that said, even if someone else steals your secret API key, they shouldn’t be able to simply transfer your cryptocurrency balance to their own wallet, as cryptocurrency exchanges disable API withdrawal permissions by default.

In recent times, the number of trade offers for stolen cryptocurrency exchange API keys appeared to be steadily increasing across hacker forums. Stolen API keys for cryptocurrency trading apps are being used by cybercriminals to easily empty their victims’ accounts on all major cryptocurrency exchanges.

Even worse, criminals can circumvent “trade-only” settings on the API keys and steal money from traders’ accounts even without obtaining their account credentials or withdrawal rights.

Typically, crypto exchanges give traders access to three different sorts of API permissions:

  • Data permissions enable APIs to read information from your exchange account, such as open orders, balances, and trade history, without affecting your account in any way.
  • Trade permissions enable APIs to carry out trades on your behalf, including opening and closing orders.
  • With a withdrawal authorization, APIs can take cryptocurrency out of your exchange account and send it somewhere else. This permission would make it possible on an app to transfer your money to another wallet without your consent.

What Are The Most Common API Abuses?

Cryptocurrency exchanges by default disable the withdrawal capability for security concerns. However, the problem is that bad-faith actors don't need to withdraw the funds directly. They can simply trade away their balances by competing with bots created by the criminals themselves while trading on behalf of their victims with the necessary authorization.

The second method frequently employed by thieves to take advantage of stolen API keys is price boosting. This technique entails purchasing cheap coins with a low trading volume in order to temporarily raise their price before reselling them to the victim at exorbitant prices.

Before taking advantage of the victim's account, exploiters start their operation by depositing a very cheap, unpopular cryptocurrency into their own middleman account.

The middleman account is utilized at the same time to resell the inflated coin to the victim for a higher price. The trade volume and price return to normal after the orders are fulfilled, leaving the victim with a collection of essentially worthless coins that they were forced to purchase from the threat actors at outrageous rates.

Finally, cybercriminals can obtain someone else's API credentials in a number of methods without infecting their device with malware or spyware. This involves searching public code repositories and web application environment files for leaked private keys. Public sources like GitHub are well-known for being treasure troves for hackers, with some of them housing hundreds of thousands of compromised files, credentials, and — you guessed it — API keys.

How to Protect Your Crypto Exchange API Keys

There are many ways you can protect yourself from API abuses. We will divide them into three main groups for easier identification.

IP Address

Enabling IP Restriction for API Trading

  • Binding an API key to an IP address adds an extra degree of protection to make sure that only requests coming from approved sources are able to access the API. This method guards against illegal access to your valuables.
  • Next, you will need to IPv6 whitelist: IPv6 whitelisting offers greater safety and compatibility compared to IPv4. You can protect your valuables by restricting access to your account to only trusted IPv6 addresses.
  • Monitoring your login behavior is much easier when you connect with a reliable, fixed IP address. This enhances the overall security of your account by making any questionable login attempts or unwanted access more obvious.

Codes

  • Keep your email verification code to yourself, as it is a crucial kind of identification validation. Sharing this code with others could jeopardize the security of your account, opening the door for possible unwanted access and API key theft.
  • It is crucial to keep the 2FA code recovery code on file in a secure location. This code can assist you in regaining access to your account if you misplace your 2FA device.
  • Keep SMS verification codes private so no one can access your account without authorization and compromise the safety of your valuables.
  • Anti-phishing code should be enabled to offer an additional layer of security to your account. It functions as a trade password to increase the overall security of your funds.
  • Never share 2FA codes with anyone, not even KuCoin staff, since they shouldn't be disclosed to anyone. For the sake of safeguarding your account and assets, keep this code secret.

Learn more about how to enhance your account security.

API Key Settings

  • Avoid sharing your API keys with unreliable third-party platforms because doing so could expose your assets to fraud and security concerns. To keep your assets safe, it's crucial to only give API keys to reliable and trustworthy platforms.
  • Additionally, when granting API permissions, it's crucial to give serious thought to and select the right level of access. By doing this, unreliable trading platforms and codes are prevented from needlessly accessing your assets.
  • If you can, generate API keys frequently. This indicates that you need to create new API keys and remove your existing one. It is simple to create and remove API keys while using different platforms. If possible, rotate your API keys on a schedule similar to how some systems make you alter your password every 30 to 90 days.

Conclusion

API keys are crucial because they enable communication and data sharing between platforms and apps. They must be protected, too, as hackers may exploit them to get access to finances, personal information, and privileges.

We hope that you have got the necessary insight into the API key notion and how to protect yourself, your data, and your funds. It is possible to minimize risks and losses of funds by just understanding the functioning of API, as well as the best practices in how to care for them.

Always be updated with the latest news on vulnerabilities, protect your passwords and codes, and use common sense.

Further Reading

If you want to learn more about how to stay protected when participating in the crypto space, check out some of our articles below:


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