Now that Web3 has become the wild west, are crypto investor’s funds safe from hackers?

4 Mins read

Web3 promises to give everyone the features folks love about the internet while enhancing their privacy and securing their data with a blockchain-based architecture.

That, at least, is the theory. Several recent attacks have made some question if they should just give their money and data to Mark Zuckerberg and call it a day. In actuality, Web3 is turning into a security nightmare.

What is Web3?

The integration of artificial intelligence in Web3 enables consumers to access real-time data while delivering more accurate results. 3D graphics and visualizations are available to consumers thanks to Web3.

Another key component of Web3 is the Semantic Web features, which can aid in effective word comprehension. Data will therefore be simple to find, share, and evaluate for machines and people in Web3.

Web3 also improves security and privacy. Web3 also emphasizes user data security and identity protection. To safeguard user identity and data, Web3 employs cutting-edge authorization strategies, including distributed ledger technology and encryption. 

What sets it apart from Web 2.0?

Web 3.0 is decentralized and operated by a system of algorithms and smart contracts, as opposed to Web 2.0, which is centralized and managed by an entity. In Web 2.0, data is gathered by the company and utilized to the firm’s advantage, but the data is also released to the public.

Thousands of cryptocurrencies have been produced, and the World Bank Group estimates their combined value is already close to US$2.8 trillion. With $144 billion transmitted every 24 hours, this area has become a true haven for malicious hackers.

Cryptocurrency fraud, theft, and ransomware assaults are rising, with an estimated $30 billion taken overall; in 2021, that amount is expected to increase by 70% year over year to $14 billion. Cybercriminals have stolen roughly $2 billion worth of cryptocurrency this year alone, marking a 60% increase in such offences. Blockchain transactions swiftly gain a negative reputation through dishonesty or open-source code flaws.

Axie Infinity; latest Web3 Hacks

The play-to-earn game Axie Infinity, which is meant to be the model for what Web3 can be, is the subject of the most recent security catastrophe. Hackers attacked the Ronin “bridge” connecting Axie and the Ethereum blockchain. If you missed it, They stole $552 million from it, which is an astounding sum even in the gilded era of cryptocurrency.

How the attack occurred is even more startling. According to developer Molly White, the team behind Axie designed the bridge only to need nine trusted validators, meaning that a hacker was only required to breach five accounts to obtain the kingdom’s keys.

What’s worse is that it took the Axie personnel six days to discover the theft of $630 million worth of Ethereum and also to inform the users whose funds had been taken.

Other platforms become victims.

The Axie fiasco is by no means an anomaly. In February, hackers stole $1B from Wormhole, a well-liked bridge to the Solana blockchain. Or users, the venture capitalists outside of Wormhole agreed to backstop the losses despite the engineers’ all but shrugging shoulders in recognition of the awful optics. Cashio, the Solana stablecoin protocol, lost $28 million this year. Over $600 million worth of Poly Network data was stolen last August.

There are countless instances of Web3 users being defrauded due to security flaws in their systems.

A Web2-style attack struck more than two dozen Web3 businesses, including Circle and BlockFi, who exposed it last month. In another case, hackers broke into one of their marketing providers and stole a lot of client data, which is already being utilized in phishing attacks and other schemes.

Risks involved in Web3

With a decentralized ledger, machine learning, and big data technologies, Web 3.0 is the development of interest where apps and websites can evaluate data like a human. Unlike Web 2.0, the data is decentralized, open, independent, and intelligent here. The risks that come with each technology, however, are unique.

Comprehensively,  Some include data quality, availability, confidentiality, and data manipulation. The most crucial issue in the technology industry is cybersecurity. Additionally, as Web 3.0 matures, new cybersecurity threats will become evident.

The risks

Data confidentiality: Ethereum addresses include critical, confidential details like credit card and bank account numbers. Ethereum addresses should be handled carefully by DeFi-sites, and they should only reveal them to outside parties when necessary. DeFi must live up to its name by staying away from centralized APIs and analytics suppliers because the “De” stands for “decentralized” in the acronym. In Web 3.0, confidentiality is a grave issue.

DeFi protocols may gather sensitive and confidential data because they gather so much personal information, including wallet addresses, bank account numbers, and credit card numbers. If such details are disclosed or recorded by Google Analytics, it will provide Google access to so much personal data that it becomes dangerous.

Information quality — Due to the low adoption of Web 3.0, the knowledge that is now accessible may be greatly biased and, therefore, inaccurate. This thus calls into doubt the accuracy of the data collected.

Data manipulation: The data fed into the machine learning algorithm teaches Artificial intelligence technology. Just in case the data sources altered the information to suit their needs.

Data accessibility: Web 3.0 relies on data. Web 3.0 will stop operating and vanish if there is no data at some point in the future.

Prone to irreparable Financial loss: By exploiting flaws in smart contracts, hackers could acquire illegal access to wallets and move cryptocurrency to their accounts.

Bottom Line

Investors in cryptocurrencies have been obliged to realign their investment opportunities with networks that reflect safety due to nearly a year of the bear market and several hacks. Web3 business owners must therefore take steps to guarantee the long-term viability of their products.

Implementing bug bounty programs is one technique to reduce the risks of an attack. Whitehat hackers are drawn to bug bounties because they look for weaknesses from a hacker’s viewpoint. Developers receive compensation for identifying and resolving legitimate vulnerabilities in the system.

Additionally, business owners need to create multisig accounts to hold money and stay away from centralized control of their wallets.

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