The Need for Security in Web3 Space
This article is a writeup from DPAD’s YCombinator session where 11 projects are currently in incubation. The presentation was delivered by Pretam Rao, the Founder and CEO of QuillAudits. According to him, security in Web3 space is crucial due to the decentralized nature of the technology. In Web3, assets are stored and transferred using blockchain technology, making them susceptible to hacking, theft, and other forms of malicious activities. Additionally, Web3 protocols and decentralized applications (dApps) handle sensitive information such as financial transactions and personal data, making it even more imperative to ensure the security of these systems. A single security breach can result in significant financial losses and damage to reputation, which highlights the importance of implementing robust security measures in the Web3 space.
Security Attacks in the Web3 Space
A number of decentralized protocols experienced attacks in 2022, with over $50 billion lost. By chain, more than 357 cases were reported with Terra reportedly losing over $40 billion to hackers. Centralized applications and Ethereum came a close second and third with $6B and $1B lost, respectively. Solana, BSC, Arbitrum, and Fantom lost between $600M and $40M. Avalanche, Optimism, and Polygon lost $27M, $26M, and $24M. The most targeted in the crypto sector was Stablecoin and CeFi that lost $40B and $8.1B. Other targeted areas of crypto include; Lending, Bridge, DEX, Yield, Token, and NFT.
A Smart Contract Audit Process
A reputable smart contract audit firm follows a process to achieve a secured smart contract;
- Gathering code design patterns: The audit company gathers specifications about the code to understand the intended behavior of smart contract and review the architecture to ensure it is structured and capable of integration of third-party smart contracts.
- Functional testing: Smart contract features are tested to verify that the business and operational logic are implemented and working in the intended manner.
- Manual analysis: The audit company performs a line by line inspection of the smart contract in order to find potential threats like transaction-ordering dependence and denial of service attacks.
- Initial report: A report with all recorded vulnerabilities is submitted. The company proceeds to fix the bugs.
- Static analysis: Code reviews are performed using in-house automated tools to detect possible coding flaws.
- Final report: The final report is then published and available for everyone to read.
How to Curb Attacks in Web3
The first step to preventing malicious attacks in Web3 is to carry out a thorough audit to expose any loophole. This should be done regularly, as hackers will always look for a new way to break through. Choose a good audit company based on expertise, tools, and reports, and not brand names. It’s best to go with two audit companies. When we say auditing, we mean full platform security auditing, and not just smart contracts.
Apart from auditing;
- Always use the best developers. Developers are part of several rug pulls and scams and can prevent a potential attack on your application.
- Plan bug bounty on ImmuneFi or CodeArena.
- Use insurance protocols.
- Set monitoring alerts.
- Prepare a disaster recovery plan.
How to Build a Secure Web3 Application (Developer Guidelines)
To build a secure Web3 application as a developer, below are guidelines to follow;
- Follow development guidelines from security companies like QuillAudits.
- Always write unit test cases 90%+ code coverage.
- Use testing frameworks foundry, brownie, etc.
- Don’t rush for code.
- Keep up-to-date with new attack vulnerabilities.
- Be fully aware of solidity documentation, notes, and warnings.
- Have a deep understanding of blockchain fundamentals and network architecture.
- Document all the assumptions when designing the code and verify them.
- Have a thorough understanding of Ethereum yellow paper.
- Have audit guidelines/ different approaches for NFT, DeFi, etc.
Conclusion
Security is crucial in Web3 as it is the foundation for trust in decentralized systems and applications. A secured decentralized application will ensure the integrity and validity of of transactions, protect sensitive data, prevent unauthorized access and security manipulation. Therefore, ensuring security in Web3 is critical for the growth and success of decentralized systems and applications.
