The world is continuously evolving, taking us to new spaces where we get to experience something better than what we had previously.
Speaking about evolution, the internet world is having a moment breaking off monopolistic control, which means Web3.0 is setting up new horizons.
Until then, a huge share of communication and data access is handled by the central gatekeeper rather than users.
But with great trust also comes the responsibility for your investments on the blockchain. The most pressing of all the concerns on Web3 is its security.
Security is not a task to get done in one go but a process which involves dealing with the hidden complexities of the technology.
Let’s just unwind the transformation of the internet over the years from what it was before to how it got shifted now, and also look for the challenges that are tied with it.
The growth trajectory of the internet goes from Web1, Web2 & Web3. Tim Bernes Lee, acclaimed popularly as the founder of the web, coined the name for different categories of web evolution.
Into the Details…
Web1.0 laid the basics of the read-only web. It allowed the users to consume information by simply searching and reading it.
There wasn’t much engagement as the users can only read the information, and they cannot contribute or change anything on the web.
Then arrived the alterations in the web, which is distinguished as Web2.0. Web2.0 allowed to read-write, which increased the user interactions on the internet.
Users started to socialize in groups through emails, social media platforms and so on. You could easily guess what happened next.
Big tech giants occupied the space and took over the central control of users’ information. Major traffic in Web2.0 is brought by techies like Google, Facebook, Netflix, etc.
These companies acted as the major driver for blockchain enthusiasts to enter the inquisitive space of Web3 to take control over the ownership of the data by the user themself.
Web3.0, for the most part, brings about the iteration of Read-Write-Own. The data handling in Web2 increased the reliability of private companies.
That meant placing too much trust on the central companies to act in the best interest of the public. To overcome this, Web3 was designed to act out smartly and independently.
Utilizing artificial intelligence and IoT, the interactions between the real and digital worlds are established in Web3. Not just about communication but also about the creation and ownership of assets and authority to have a say on the platform governance.
In short, the privilege of data ownership with decentralized governance is what web3 offers users.
As with the greater control handed to the users also comes the greater responsibility, and that’s where the challenge for security arises.
More in detail below.
Catching Up On Web3 Security
Researchers estimate the blockchain market will surpass six million dollars in worth by 2023. Furthermore, they will scale at a CAGR of 44.6% from 2023 to 2030.
As industries are using blockchain applications to fulfil operational needs, this presents a problem with security. The issues dealt with at different levels shall be revealed in the upcoming passage.
Most dapps that are supposed to work by decentralized means do not authenticate API responses. In reality, web3.0 applications use centralized services like Infura, Alchemy, etc.
By decentralization, the authority and permission lie on the blockchain and not on the centralized database.
But the intrusion of the central point of services in the dapp functioning shows the reliability of web3 apps.
This shows that the Web3 model is yet to completely eliminate the central control, and removing those points from the equation is one of the challenges.
Lack of Safety nets
The blockchain landscape is essentially unregulated, with most regulators lacking a definite understanding of the space.
There are no advisory bonds or written rules on how this ecosystem operates that bring in bad interactions and bad actors to disrupt the structure and gain the advantage of it.
Thus any activities performed, whether good or bad, is unquestionable as there are no safety nets or regulations to seek in case of crisis.
Private key safety
The possession of user assets and access to them are controlled through private keys. They act as the user-controlled doorway to managing wallets.
Whereas the problem is losing those keys would mean the loss of possession of assets. However, users rely on web2 platforms to manage those keys for the safety of the assets.
But decentralization means much less in operating this way wherein the users should do the management of keys without the involvement of the intermediaries.
Here are some instances of the private key compromises in 2022 and the evaluated fund loss.
Harmony protocol exploit for $97M, Slope wallet hack of $8M, ZBExchange’s private key compromise cost $4.8M.
These figures firmly indicated the effect and impact that private keys has on the Web3 assets.
Blockchain integrates AI technology to study human emotions and replicate the same for a seamless virtual experience.
But, automation has side effects of exploiting human behaviours by impersonating them and scamming the space. This leads to vulnerabilities that affect the users who want nothing but to experience the best of web3.
Accountability of decisions
As discussed above, the key structure of the space is yet to be explored. This alarms the security concerns to the decentralized community as nobody is accountable for the problems that arise in the decentralized space.
The scalability of blockchain technology is a greater hindrance to the wider adoption of web3. Vitalik came up with this scalability trilemma – Decentralization, security and scalability.
Only two of the three can be chosen at any point in time. This indicates the need for improvisations.
Last but not least, the weightage of its value is proportionate to the risks it is exposed to. In that way, smart contracts correspond to most hacks by attackers leveraging coding flaws.
Smart contracts hacks are on the uprising trend as with the extending scope of Web3. As smart contracts are coded with complex functionalities, it offers a broad scope for countless hacks to be launched, exploiting even the slightest disparities in the coding.
Auditing contracts from third-party companies assess the security strength of the developed contracts aiding the safe deployment of the protocol.
Here’s a short glimpse of the smart contract hacks that happened more recently. DaoSwap’s validation error on smart contract exploited for 581,257 USDT.
Furthermore, contract vulnerabilities on ShadowFi, and DDC projects led to loss of $300,000 and $104,600, respectively.
For the benefit of the web3 community, the need for audit companies is more than ever to add value to smart contracts.
In the end,
A greater maturity of the space is needed for the users to handle the democratisation of data and possession of data ownership rights.
Awareness at various levels can help educate and turn the world into followers of web3.
- Protocol designed with ethical practices in mind
- Perform security audits of the developed logic contracts
- Taking up the due diligence services before making investments
- Educating peers to develop the mindset of learning and questioning
QuillAudits has, over the years, strengthened its portfolio in securing the Web3 projects, which accounted for the save of 15B+ in funds.
From the awareness programs to the auditing and due diligence services, we cover every aspect of Web3 security under one roof.