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The advent of Web3 is considered blockchain support for the current state of the internet. However, as a nascent technology, Web3 sparks much discussion about its true capabilities and role in our daily lives.
Considering the promise of a decentralized internet using public blockchains, a full transition to Web3 will require scrutiny of a number of factors. In general, security is one of the most important features, in the Web3-powered world, and blockchain-hosted tools and applications become mainstream.
Vulnerabilities of smart contracts
While the blockchains hosting Web3 applications remain impenetrable by attackers, hackers target vulnerabilities in the project’s smart contracts. Smart contract attacks on decentralized finance (DeFi) platforms have surged. A recent study revealed that around $1.6 billion in cryptocurrencies were stolen in the first quarter of 2022.
Although DeFi is a subset of Web3, it reflects the biggest vulnerability in the ecosystem. Therefore, Web3 users need to redirect their marketing budgets toward core system development.
As seen throughout the year, the vulnerabilities allow hackers to take away large amounts of assets resulting in losses for investors and possibly causing the indirect collapse of the ecosystems involved.
Threats from within
In addition to external hacks, bad actors in the system can deceive the project and investors. Insecure mechanisms with access can cause internal attacks.
On August 14, automated trading and liquidity market Maker (AMM) Velodrome Finance recovered $350,000 from one of its team members, Gabagool. One of Velodrome’s high-value wallets was drained of $350,000. An internal investigation later revealed the identity of the attacker, allowing the company to recover all lost funds.
Web3 consolidation
More than six months of bear markets coupled with countless hacks have forced crypto investors to redesign their investments with a secure ecosystem. Therefore, Web3 entrepreneurs are expected to take measures that ensure the long-term success of their services.
One way to minimize the risk of an attack is to implement a bug bounty initiative. Bug bounties attract whitehat hackers who try to identify vulnerabilities from a hacker’s perspective. Developers are rewarded for finding and fixing valid bugs in the system.
In addition, entrepreneurs must set up multisig wallets to store funds and avoid centralized control over wallets. Such measures are implemented system-wide, reflecting better decentralization and isolation from staged attacks.
