With this being said, a lot of buzz on the potential of web3 makes it attractive for hackers to pry on security vulnerabilities and launder assets.
Although blockchain space is created for increased transparency and privacy over data, it needs to be optimized from the security aspect.
That makes blockchain most vulnerable as much as it is advanced.
Let’s get an overview of security threats and find out what best security practices one needs to adopt while beginning their web3 journey.
Most Prevalent Security Threats
Crypto frauds: Cryptocurrency is perceived to be the most secure form of virtual currencies. Hence they pay the slightest attention to security as they do with centralized organisations holding their money.
The use of simple passwords, skipping 2FA is evident disregard of security by the users. This gives rise to increased possibilities of evolving strategies of hacks and scams.
Another major concern centres around smart contract coding. Hackers on the lookout for bugs utilize the chance to manipulate the outcome to their advantage. The end result is the loss of funds the contract is dealing with.
Highlighting here some of the common errors in the smart contract code.
Unhandled case for decimal tokens: The contracts have an unhandled case. This means the decimal value of the token used to purchase the IDOToken does not match; hence, the desired output is not achieved.
Token burn by owners: Coding should be done in a way so only token holders can burn their own tokens and not anyone else. Not even a contract creator. This bestows more rights to the token holders who have invested in it.
Reentrancy issues: Critical operations, such as deposit and Withdraw, can lead to reentrancy scenarios. Considering the fact that the recipient/caller can make a reentrant call if the rewarder rewards in the native currency. This would lead to the draining of tokens locked in the contracts.
Check-Effect-Interaction pattern: If there are vulnerable external calls, reentrancy attacks could be conducted because these functions have state updates and event emits after external calls. However, third parties may be compromised if the check-effect-interaction is not followed, which leads to assets lost or stolen.
Address verification: Certain functions lack a safety check in the address. The address-type argument should include a zero-address test. Otherwise, the contract’s functionality may become inaccessible, or tokens may be burned in perpetuity.
Rug pull scams: Another prominent attack that has a disastrous impact on web3 is the rug pull scams. It simply works by tricking investors into believing the projects’ enticing potential and the rewards tagged along with it.
Once the token prices are pumped up, the project creators would dump tokens and disappear in thin air. The investor is left with useless tokens of zero value. Not all the tokens that have got all the hype are really potential ones.
They may be eyewash and should be doubted for pump and dump scams. Most importantly, researching the token’s background gives an idea of tokens, which helps in making investment decisions.
Rug pull checker tools are available for use, which assesses the project based on certain parameters and finds the severity of risks in the project. Based on this, the investor can make a wise move in trusting the tokens.
Private Key compromise and wallet breaches: Private keys are the gateway to accessing funds. Managing private keys, however, has a greater impact on asset holdings. Losing private keys means losing your crypto savings once and for all.
Also, leaking private keys to anybody means handing over the control of your assets to that individual. Storing them in cold wallets and staying mindful about where you enter your private keys are to be taken care of for the safe handling of funds in the crypto wallets.
End-to-end security tips
User knowledge: Protocol should briefly describe the notion around which it is built and educate users on the same.
Comprehending attacker’s move: The protocol should be understood from the attacker’s point of view. For example, how as a miner/validator, the protocol can be manipulated for one’s own advantage.
Flawless coding: The key to security lies in the coding. It is good to go through programming tips (e.g. Solidity tips) while coding the program. The usage of comments should well serve the purpose.
Be mindful while giving access control in code, the use of invariants should be dealt with carefully.
Extend security knowledge: The code should be looked upon by other internal team members for any hidden vulnerabilities that can be caught.
Security audits: If coding is the key, auditing is a tool to check the trustability and security of the key. It is always good to have another pair of eyes looking at the code.
In addition, security audits conducted by reputed firms adopt an extensive testing process manually and through various tools that make it almost hard for any security leaks. You can always verify the firm’s process in performing the code auditing.
Ensuring security is not a one-time job, as regular audits need to be conducted periodically to inculcate critical changes through updates. This makes the protocol most resistant to hacks.
P.S. These are the beginner steps for getting into a decentralized world.