Web3 emerged as a blockchain-powered disruption to the current state of the internet.. However, as it is a nascent technology, many assumptions fill the debates about the real capabilities of Web3 and its role in our daily lives.
Considering the promise of a decentralized internet through the use of public blockchains, a full transition to Web3 would require examination of several factors. Of all of them, security is one of the most crucialas in a world powered by Web3, blockchain-hosted tools and applications are adopted by the majority.
Smart contract vulnerabilities
Although the blockchains that host Web3 applications remain impenetrable from being held hostage by attackers, hackers target vulnerabilities within the project’s smart contracts. Attacks on smart contracts on decentralized finance (DeFi) platforms have been on the rise, with a recent study revealing that an estimated $1.6 billion worth of crypto was stolen in the first quarter of 2022 alone.
Although DeFi is a subset of the Web3 spectrum, it reflects the increased vulnerability within the ecosystem. As a result, Web3 entrepreneurs need to redirect their marketing budget to core system development.
As has been seen throughout the year, vulnerabilities that allow hackers to drain large amounts of assets lead to impermanent losses for investors and can lead to an indirect collapse of related ecosystems.
insider threats
In addition to external hacks, bad actors within the system can cheat the project and its investors. To prevent insider attacks, security mechanisms with restricted access to employees are needed.
On August 14, the automated market maker (AMMfor its acronym in English) Velodrome Finance recovered $350,000 from one of its team members, Gabagool. One of Velodrome’s high-value wallets had $350,000 stolen. A subsequent internal investigation revealed the identity of the attacker, allowing the company to recover all the loot.
Strengthening of the Web3
More than six months of bear market, coupled with countless hacks, have forced crypto investors to readjust their investments with ecosystems that reflect security. As a result, Web3 entrepreneurs are expected to take steps to ensure the long-term success of their offerings.
One way to minimize the risks of an attack is to carry out bug bounty initiatives. Bug bounties attract whitehat hackers, who try to identify vulnerabilities from a hacker’s perspective. Developers are financially rewarded for finding and fixing valid bugs in the system.
Also, entrepreneurs should create multisig wallets to store funds and avoid centralized control over these. These measures, when applied system-wide, reflect increased decentralization and isolation from orchestrated attacks.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
Keep reading:
Investments in crypto assets are not regulated. They may not be suitable for retail investors and the full amount invested may be lost. The services or products offered are not aimed at or accessible to investors in Spain.