What is Sphere (SXS)?

Security is at the root of the crypto industry's continued growth. For investors, the security of their funds is a top priority. To disseminate fundamental funds security knowledge and enhance investors' risk management and funds safety awareness, we've compiled common terms and e xplanations to help you better understand this aspect of investment.

Multi-factor authentication (MFA) is a security method that requires users to provide two or more distinct authentication factors to verify their identity. These factors can include passwords, fingerprints, facial recognition, smart cards, and more. MFA enhances account security because even if an attacker knows the user's password, they still need additional authentication factors to access the account.

In phishing attacks, attackers impersonate trusted websites, making it hard for users to spot the difference. Users may unknowingly share sensitive data like usernames, passwords, and 2FA, which can be exploited to access devices and accounts, potentially leading to unauthorized asset transfers. Therefore, it is important to exercise caution and avoid falling victim to these scams.

Official verification channels are offered by exchange platforms to prevent fraudulent individuals from impersonating official personnel. Users can verify their identities through methods such as email, phone numbers, WhatsApp, and other links and accounts.

Anti-money laundering refers to the act of adopting relevant measures to prevent any money laundering activity for the purpose of concealing or disguising, by all means, the sources and nature of criminal proceeds generated from any drug-related crime, organizational crime of any gangland, terrorist crime, crime of smuggling, crime of corruption or bribery, crime of disrupting the financial management order, crime of financial fraud, etc. Anti-money laundering is essential for the steady operation of the financial system, social justice, fair m arket competition, and combating corruption and other economic crimes.

KYC stands for "Know Your Customer". KYC effectively prevents user identity theft and other forms of manual intervention. In addition, KYC greatly improves user asset security and reduces fraud, money laundering, scams, and terrorism financing. To safeguard user account and asset information, in the event that a user's account or assets are at risk, verifying their KYC information can help the user quickly regain control of their account.

Financial licenses are credentials that a company or person has with a financial authority in order to be able to provide financial services or trading services. The types of financial licenses may vary from one country or region to another, including banking licenses, securities licenses, and insurance licenses, and the requirements for obtaining them can also differ. Obtaining a financial license typically requires meeting a set of specific requirements and standards, as well as complying with relevant regulations and legal requirements. The crypto industry, being relatively new, has not yet established a unified regulatory framework and standards globally. Regulatory attitudes vary among different countries and regions. In the Asia-Pacific region, Hong Kong initiated its licensing regime for virtual asset exchanges on June 1, 2023.

A Merkle tree is a tree-like data structure used to verify the integrity and security of data. At the bottom of each account, there is an account node, and both the account balance and account name will be encrypted using SHA256 once. The obtained hash value can be recalculated along with the adjacent hash values, and then computed layer by layer upward until the hash calculation reaches the root of the Merkle tree structure. To verify if the ledger has changed, users only need to follow the steps to perform a hash calculation on their account, locate their position in the tree along with adjacent nodes, and then compute hash values layer by layer until they ultimately reach the tree root that the user has calculated. This data structure is widely used in many fields, such as blockchain, databases, file systems, and more.

Proof of reserves (PoR) refers to an auditing procedure that verifies the holdings of an exchange through cryptographic proofs, public wallet ownership, and recurring audits. The custodian ensures transparency and provides proof of on-chain reserves being equal to or exceeding the sum of all user holdings. If the total amount verified is greater than or equal to 100%, it means that the platform can provide full protection for all user assets.

A smart contract audit involves a detailed inspection and analysis of the code of a smart contract on a blockchain to identify vulnerabilities, flaws, or other potential security issues. Smart contract code audits need to pay special attention to the security, correctness, reliability, and scalability of smart contracts to ensure that the functionality and business logic of the smart contract meet expectations and will not be exploited by hackers or other security threats. Smart contract code audits are typically conducted by professional security auditors or security firms to ensure the security and stability of smart contracts.

Nansen is a blockchain data analytics platform that monitors changes in on-chain addresses and smart contracts over time. This enables users to instantly access the latest market movements and trends, empowering them to make well-informed investment decisions.

ISO/IEC 22301:2019 is an international standard for Business Continuity Management (BCM) published by the International Organization for Standardization (ISO). This standard provides a framework to assist organizations in maintaining business continuity when faced with unexpected events. It includes a series of requirements and best practices to help organizations respond, recover, and safeguard their critical business functions rapidly when disasters occur. This standard applies to organizations of all types and sizes, regardless of industry or geographical location.

ISO/IEC 27701:2019 is a Privacy Information Management System (PIMS) standard developed based on the ISO/IEC 27001 Information Security Management System (ISMS) framework. The standard provides a framework to help organizations effectively manage private information and ensure their compliance with relevant privacy regulations and legal requirements. It also provides some best practices for organizations to maintain the effectiveness and sustainability of their private information management systems.

ISO/IEC 27001:2013 is a standard for Information Security Management System (ISMS) that provides a framework to assist organizations in safeguarding the confidentiality, integrity, and availability of their information. It also ensures the effectiveness and sustainability of their information security management system. The standard includes a series of best practices, such as risk assessments, security controls, and internal audits, to ensure that organizations are able to identify and manage their information security risks. In addition, the standard provides guidance for organizations to ensure that their information security management systems are capable of continuous improvement and adaptation to changing environments.

PCI DSS v3.2.1 is a Payment Card Industry Data Security Standard (PCI DSS) designed to ensure that all organizations handling payment card data adhere to a set of security standards and best practices. Its goal is to protect customers' payment card information from theft or misuse. This standard includes a set of requirements, such as secure network configurations, encrypted storage, access control, and regular monitoring and testing, to ensure that organizations can safeguard the security of their payment card data. The standard also requires organizations to conduct regular self-assessments and audits and to demonstrate compliance with the standard through independent third-party audits.

The NIST cybersecurity framework is an effective information security management framework that helps organizations establish and maintain effective information security management systems. The US National Institute of Standards and Technology (NIST) provides frameworks, methodologies, and technical guidelines to help organizations perform risk assessment, security controls, and security management. The NIST cybersecurity framework also covers important areas such as authentication, access control, encryption, vulnerability management, incident response, and continuous monitoring.

Security is a broad concept with too many aspects to cover in one single article. e hope that this article provides you with the fundamentals of asset security in the crypto world and assists you in navigating the crypto space with greater security.

Disclaimer: The opinions expressed in this article are for informational purposes only. This article does not constitute an endorsement of any of the products and services discussed or investment, financial, or trading advice. Qualified professionals should be consulted prior to making financial decisions.