The web3 environment is both centralized and decentralized because of the intersection between some centralized entities and decentralized protocols. Conversely, navigating the decentralized aspect of the web3 space requires some basic understanding of the space. The decentralization of blockchain embodied various attributes and security responsibilities and as a decentralized environment, we must step up and be responsible for our security to mitigate and reduce the risk of becoming a victim.
Due to the decentralized nature of the web3, cybersecurity becomes a major concern and protecting your non-custodial wallet, decentralized exchanges transactions, and data becomes your sole responsibility. Although web3 does allow decentralized transfer of value and autonomous interactive environment, thus, decentralization comes with some security responsibility trade-off, and as always, humans remain the weak link in web3 space.
As postulated by Vitalik Buterin - the co-founder of the Ethereum blockchain - public blockchains must trade-off either decentralization, security, or scalability at the protocol and application level, as further explained by Yahoo.
“The blockchain trilemma is the problem of being unable to balance between security, decentralization, and scalability in blockchains. Decentralization is the ability of blockchains to distribute data and computing power across the many computers in their network.”
Blockchain protocols must trade-off one from the blockchain trilemmas to achieve the other two.
The web3 ecosystem inherited some security vulnerabilities from its predecessors, web1.0 and web2.0 caused by human factors. Although, blockchain technology provides additional security and privacy layers using cryptographic end-to-end encrypted processes and mathematics computational mechanisms such as zero-knowledge proof.
The web3 and blockchain technology provides centralized and decentralized platforms for transactions. In the centralized aspect of the web3, the service provided by the exchanges is centralized with a single point of failure.
Centralized exchanges (CEX) like FTX, Binance, Crypto.com, KuCoin, and Coinbase provide a platform for transacting using custodial wallets where they control your private and public keys. There is this popular saying that goes, “Not your key, not your money.”
However, in a decentralized peer-2-peer environment (DEX), you control your non-custodial wallet, your private, public keys, your money, and your security become your primary and sole responsibility.
Conversely, the security concerns in the web3 space are inherited from web2.0 as previously stated on the application level. Although, there are also protocol-level security concerns. However, some security vulnerabilities are designed to trick and deceive decentralized application (Dapp) users into giving out their sensitive information. Hackers are becoming more sophisticated in their attempts to compromise security and trick users. So making security your top priority is significant.
In every emerging technology, there are 3 actors, 1. The good actors 2. The bad actors 3. The Victim.
There are several security threats in the web3 environment.
Security vulnerabilities come in many forms, and the best solution is to educate yourself and take preventive precautions to protect yourself.
Smart contracts scripting is one of the most sophisticated tricks in the web3 space. Unaudited smart contracts pose a lot of security risks, they can be programmed with malicious intent to compromise your security by executing an unauthorized recurring transaction in your wallet when you interact with decentralized applications (Dapp).
To protect yourself, make sure you interact with audited smart contracts
Disconnect your wallet after every transaction
Rug pulls: The concept of rug pull goes beyond token value going back to zero or the project devs running away with the liquidity. Even a legitimate project with bad tokenomic could drop in value drastically. However, a smart contract can be programmed with malicious intent to lock tokens for a long period by denying withdrawal. Even after fundamentally and technically analyzing a project and even going as far as performing some technical on-chain analysis, due to encapsulated and systemic complexity project value can go back to zero even with a good fundamental. So, make sure you do your due diligence before investing in any project to avoid emotional rug pull.
There is an inherent security vulnerability threatening the internet since its inception. These security vulnerabilities transcended from web1.0 to web2.0 and now the web3 environment. Thus, pose risks to the web3 ecosystem users. However, preventing and mitigating these security risks requires proper knowledge, education, and risk management skill.
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