Web3 security: What are the risks and how to stay safe?
Web3 represents an innovative development that takes advantage of cutting-edge technologies, offering both distinctive advantages as well as potential drawbacks. The fundamental concept behind Web3 is that it should be characterized by transparency, resistance to censorship, and above all, decentralization. However, this decentralization also entails a significant tradeoff: users are required to take on greater personal risk and responsibility. With the rise of Web3 technologies and decentralized applications (dApps), there has been an increasing focus on the security of blockchain-based systems. As the world becomes more interconnected, the potential for cyberattacks and data breaches grows exponentially, making it essential to prioritize security measures in the design and implementation of Web3 applications. In this article, we will explore the current state of Web3 security and some of the best practices that users can adopt to safeguard their assets and data.
What exactly is Web3?
Web3 is a concept that envisions a decentralized and collectively owned version of the Web. Web3 technology is based on decentralized databases that necessitate majority consent for any change or modification.
Unlike previous Web technologies, where users could only read or contribute to data, Web3 enables users to both own and control their data. This ownership and control are made possible by certain fundamental principles.
In essence, Web3 denotes a decentralized version of the internet that runs on blockchain technology, which is a system where all network participants share an ever-expanding list of securely signed transaction records. These records are timestamped and linked to previous transactions, as part of a distributed ledger structure. ReportLinker suggests that this approach has the potential to transform internet usage, and anticipates that the global market for Web3 blockchain will grow at a CAGR of over 38% to reach $12.5 billion by 2028.
The realm of Web3 has entirely transformed online exchanges, although it remains exposed to certain hazards. Although blockchain technology and other fundamental tools provide greater durability, Web3 security still carries over numerous threats from its predecessor, Web2.
What are Web3 security risks?
As Web3 evolves rapidly, it is crucial to recognize the potential dangers that come with this latest version of the internet. The shift to Web3 brings forth four primary categories of risks that we will discuss below.
Web3 data security
The Web3 network brings forth novel data security threats for being broader. Although blockchain transactions are secure due to encryption and decentralized data reduces the risk of single-point attacks, it presents various hazards such as data manipulation and authenticity concerns. Furthermore, reduced centralized oversight gives rise to worries about endpoint attacks, traffic overloads, and exploits affecting service availability.
Economic and regulatory challenges
The blockchains that support the majority of current Web3 DApps are susceptible to various factors such as economic downturns or volatility in the crypto market. These elements can have a significant impact on the functioning of these dApps.
Additionally, there is a possibility of unfavorable legislation directed toward Web3 or the crypto industry. This can lead to a trickle-down effect and negatively affect most Web3 dApps. Censorship from centralized Web3 services like node providers may also cause traffic blocking or takedowns.
Furthermore, technical glitches or attacks by malicious actors on blockchain networks, including untrustworthy node operators, can also result in issues with these networks and Web3 security concerns.
Although blockchain-based infrastructures have been implemented, Web3 still faces various social engineering threats including cryptographic hijacking, smart contract logic hacks, and flash loan attacks. Additionally, traditional threats like phishing attacks continue to pose risks, and the intricate interfaces of Web3 worsen the issue.
Web3 security risks for identity
The user-controlled wallets, ID portability, and data minimization features of Web3 grant users greater authority over their data. Nevertheless, the downsides to self-sovereign identity, pseudonymity, and anonymity are also present. Public blockchains that are transparent come with security and privacy tradeoffs. Due to the decentralized nature of Web3, concerns emerge around user experience, privacy, compliance, and anonymity.
Privacy and sensitive data risks
Web3 presents a significant risk to the privacy of sensitive information, as unauthorized access to confidential data is one of the most common types of web3 hacks. This risk is amplified by the exponential growth of data available on the internet through web3.
While web3 technology allows for personalized user experiences and intelligent automation, it also facilitates the decoding of personal information and browsing history. Therefore, web3 security must prioritize preventing unauthorized access, modification, and utilization of resources to protect users’ sensitive data. Unauthorized access scenarios include entities gaining system access without authentication and concerns about data manipulation during network transfer.
How to stay safe against Web3 security risks
Web 3.0 can adopt several security best practices from Web 2.0. For example:
- Use two-factor authentication (2FA)
- Create strong passwords
- Don’t reuse passwords between services
- Be aware of scams and phishing attempts
- Always review and check a source before you download
In addition, diversification is a wise approach to adopt. You can reduce the risk of financial loss by diversifying your cryptocurrency assets among self-custody wallets, offline hardware wallets, and CEXs. It is also advisable to spread your funds across multiple smart contracts and platforms when using DApps instead of depositing everything into one protocol.
Here are some other steps you can take to safeguard yourself against Web3 security risks.
Safeguard your private keys
If you opt for a self-custody wallet instead of a centralized exchange to store your assets, you will have exclusive control over your private keys and consequently your assets. Typically, a recovery phrase consisting of a distinct sequence of 12 or 24 words is used to back up private keys, which provides access to a crypto wallet address. It is essential to be cautious with recovery phrases as they, just like private keys, grant complete authority over the assets in a wallet.
To safeguard their recovery phrases, many people keep them in a fireproof safe. Additionally, it may be wise to keep multiple copies of recovery phrases in different locations like home safes or bank safety deposit boxes; however, each copy must also be kept securely since each physical instance of the phrase heightens the risk of theft or compromise.
Protection against scams and hacks
Safeguarding your private keys and recovery phrases from digital theft is one of the most crucial web3 security measures because most hacks, scams, and phishing attempts in the crypto world target them. If a hacker gains access to either one of them, they will take control of your assets.
Phishing attempts are the most ordinary way someone tries to gain entry into your wallet. You may receive messages or emails from individuals posing as someone else, such as a support team member, asking for your private key or recovery phrase. If you’re unsure whether a message is authentic, contact the company directly. Scammers may also inform you that you’ve won a prize, and request your critical wallet information. Above all, you should never share your private keys and recovery phrases with anybody.
One excellent approach to safeguarding your private keys is to keep them offline using a self-custody hardware wallet, a technique known as “cold storage.” In this manner, your private keys are never revealed when you’re online. Hardware wallets are the gold standard for secure, offline crypto storage, but you must ensure that you keep them safe just like a recovery phrase.
Be careful about smart contacts failures
The decentralized Web comprises websites and DApps that run on blockchain networks. These networks are based on smart contracts which play a fundamental role in Web3. Although smart contracts are relatively new, they can contain code errors that can have disastrous consequences since they execute automatically.
Hackers often search the code for errors that they can use to steal funds from DApps or their users. Some malicious actors even develop smart contracts that drain assets from crypto wallets intentionally.
So, what can we do to stay safe from these Web3 security risks? Here are a few things:
- Stick with well-known and safe.
- Avoid newer dApps or services that might present more risks.
- Double-check the URLs for services you use and consider bookmarking them to avoid being redirected to an imitation site.
Web3 security with Teleport Plaque Addresses
The Teleport Plaque Address (TPA) is a unique code comprising three letters and three numbers that functions as a Web3 addressing protocol. This Smart Contract operates on the Ethereum blockchain, making it easier for businesses to establish themselves on the Metaverse and other Web3 platforms.
By using TPA domain names, users can access websites without being subject to interference or censorship by central authorities. As a result, Web3 TPA provides enhanced security and privacy for users. TPA domain names represent a significant shift in domain ownership towards a trustless solution that improves security, privacy, and the overall user experience.
In conclusion, the emergence of Web3 has brought about exciting new possibilities for decentralized applications and blockchain technology. However, as with any new technology, there are inherent Web3 security risks that must be addressed to ensure the safety and protection of users’ data and assets.
Web3 enables you to be in charge of your assets and act as your own custodian, but it also demands caution and awareness. Every online activity requires trust, and there is always an element of uncertainty involved. Although Web3 hasn’t achieved this yet, its fundamental principle is to minimize this uncertainty and increase transparency.