How Coinbase Exchange Protects Users from Risky Assets
Coinbase Exchange reviews thousands of Cryptocurrency tokens; around 90% never get considered for listing as they do not meet its strict requirements for protection against scams like “pump-and-dumps” and “rug pulls.”
The exchange platform is proprietary threat detection software has identified and blocked over 700 tokens with malicious software that can harm Coinbase Exchange users.
Coinbase Exchange team also conducts in-depth research on projects to ensure they do not have a record of engaging in questionable business practices.
In order to get the next 100 million people into web3, Coinbase Exchange needs to make it easy to buy, sell, and hold the safest and most reputable catalog of digital currencies and assets, and further solidify itself as the most trusted bridge to the Cryptocurrency economy. For this, Coinbase Exchange also needs to make sure its users are protected.
That is why Coinbase Exchange is goal is to list every asset that meets industry-leading standards for risk, safety, and user protection: If an asset does not meet those standards, the exchange platform does not list it.
Coinbase Exchange only announce the assets it has decided to list — not the ones that fail to meet its standards. But it has received feedback from crypto enthusiasts to learn more about how it decides which assets are added to its roadmap.
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How Coinbase Exchange Reviews Digital Assets
The exchange platform reviews assets based on applications submitted by project teams on Coinbase Asset Hub, as well as the thousands of other projects it tracks across the global web3 ecosystem.
The order in which it sequences asset reviews is not based on whether a project is popular or interesting. Its framework is much more objective and nuanced, and includes factors such as the legitimacy of a project is white paper, integrity of project contributors, details of how project token works, and engagement levels of their user and developer communities. Coinbase only consider listing those assets that meet its rigorous guidelines for legality, safety, reputability, and technical integrability.
Coinbase Exchange does not list the majority of the tokens that it reviews. In fact, out of every 100 tokens it considers, only around 10 are identified as potential candidates for Coinbase Exchange, and fewer than that actually get approved for listing.
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Today we will talk in length about the industry-leading tools, systems and methods Coinbase exchange uses to protect its users from suspicious digital Assets.
How Coinbase threat detection software keeps users safe
Blockchain Technology is constantly evolving and growing, so an asset review system must be able to adapt as it evolves.
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That is why Coinbase Exchange developed its proprietary secure trait analyzer, a safety-first, threat detection software that informs if a token is designed in a way that can harm you or your Cryptocurrency.
Coinbase threat detection software automatically reviews tokens on all the blockchains it supports, and identifies those programmed with software (also known as smart contracts) that can potentially harm Coinbase Exchange Customers. The secure trait analyzer works by detecting specific patterns in smart contracts (which the company calls code signatures), and comparing them against its database of code signatures from previously analyzed smart contracts. As the number of smart contracts, it reviews grows, the faster it will be able to distinguish the safer tokens from the riskier ones.
So far, the exchange platform is listings team has used this automated system to identify over 700 tokens that did not meet its security standards due to critical risks, such as single individuals being able to automatically seize users’ funds or unilaterally drain account balances. The proprietary software has also helped the firm to detect dangerous backdoor vulnerabilities — like those that can be used for rug pulls, in nearly one out of every four smart contracts it has reviewed.
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Whenever the software finds things that are not safe, the firm asks the concerned project teams to take the appropriate measures to mitigate those risks. If they do not, the firm does not list their tokens.
Added security features from comprehensive research
In addition to screening smart contracts with Coinbase threat detection software, it also conducts other types of detailed due diligence research to protect its users.
That includes in-depth research into the project is purpose, milestones, and key contributors to make sure it is complying with regulations and identifying any potential connections to illicit activity.
To capture the most comprehensive view of all assets it considers for listing, the firm also performs on-chain and off-chain analyses of quantitative and qualitative signals — things like historical token prices and trading volume, ownership and vesting schedules, investment and financing history, market capitalization, community sentiment, technical roadmap, and information regarding how tokens are earned, burned, and distributed.
Digging deeper: Protecting Coinbase users from bad actors
Beyond the firm is security reviews, it also takes other important steps to protect its customers from scams.
Earlier this year, it implemented a fraud detection framework that expanded its ability to identify even more factors that could potentially harm Coinbase Exchange Customers. This analysis is specifically designed to evaluate consumer and business risks that might not show up when it reviews project whitepapers or analyze token smart contracts — things like key project contributors with a record of shady business practices or confirmed allegations of pump-and-dumps.
Since implementing this additional layer of protection, the firm is listings team has identified nearly 100 projects with tokens that it perceived to be high risk and have chosen not to list.
Coinbase exchange is the also the most trusted platform for buying, selling, and exchanging Digital Currencies and Assets. While it aims to list as many assets as it legally can, its priority is to protect users. Coinbase Exchange has invested an enormous amount in tools and processes that weed out risky assets, and will continue working towards keeping all Coinbase users safe.
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