Web3 is an idea of the new internet. A decentral and open place for the web to coexist securely. But are we really secure when everything is transparent? Let’s discover the various hacks and how cryptography helps strengthen the internet.
The internet has come a long way since its inception, with Web 2.0 giving us a more interactive and collaborative version of the web. Web2 enables users to create and share content. However, Web3 is gaining traction, which promises to revolutionize the internet again.
Web 3.0 is the next generation of the web with a more decentralized, secure, and trustless network.
One of the significant advantages of the decentral web is the focus on security. The DLT ensures the privacy and security of users’ data with the help of encryptions and smart contracts. While encrypting secure messaging, smart contracts help execute transactions without the interference of intermediaries. Reducing middlemen, thus reducing the risk of fraudulent activities.
However, despite the promise of increased security, Web3 is not immune to exploitation. As with any new technology, hackers are always looking for vulnerabilities to exploit, and Web 3.0 is no exception.
In this blog post, we will explore Web 3.0, its security features, and the chances/reasons for exploitation. And a surprising listicle in the end!
On Web3
Web3 is the next version of the internet that aims to have a more open, safe, and transparent network. A critical component of Web3 is Digital Ledger Technology. It provides a secure and easy method to store and transfer data.
A blockchain is a distributed digital ledger of transactions that is present across networks. Each block in the chain is secure with encryption. All blocks contain a hash, a unique code that identifies the block and the data it contains. Once a block is on the chain, altering or deleting the information is inevitable. This technology thus provides a tamper-proof way to store and transfer data.
Read More: On Smart Contracts
The use of blockchain technology in Web3 provides a more secure and transparent way to store and transfer data, reducing the risk of fraud and increasing trust among users. With Web3 and blockchain technology, individuals can take control of their data and participate in a decentralized network, promoting greater privacy, security, and autonomy.
On Encryption and Its Types in Blockchain Tech
Encryption is the process of converting plain text or data into a cipher or code, making it unreadable to anyone who does not have the key or password to decrypt it. It is a crucial aspect of blockchain technology, where data privacy and security are of prime importance.
Encryption ensures that only authorized individuals can access sensitive information and prevents it from getting intercepted or stolen. There are different types of encryption in blockchain technology, each serving a specific purpose.
Firstly, we have symmetric encryption. An encryption type that uses one key for encryption and decryption. It is a fast and efficient method, but the key needs to be securely accessible between the sender and receiver.
The second type is asymmetric encryption, which uses two keys, a public key and a private key. The public key is visible to others, while the private key is secure with the owner. Data encrypted with the public key can only be decrypted with the private key, providing a more secure method.
Lastly, we have an encryption type known as hashing. Hashing is a process where data transforms into a fixed-length string of characters. The firm encryption makes it impossible to reverse and retrieve the original data. Hashing commonly secures passwords and verifies data integrity.
But if cryptography can solve problems, wouldn’t it provide a strong firewall against hacks and exploitations of code?
On Reasons Why Hacks Occur in Web3
It is not necessarily “easy” to hack in Web3. As the decentralized and secure nature of the network provides significant advantages over traditional centralized systems, the security systems are pretty rigid. However, there are still some potential vulnerabilities that hackers exploit. Here are a few reasons why Web3 could be vulnerable to hacking:
Smart Contract Vulnerabilities
Smart contracts are autonomous agreements that the digital ledger preserves. If there are errors or vulnerabilities in the code, attackers will exploit it to steal data or funds.
Private Key Management
Private keys enable access and control data on the blockchain. If private keys are not secure, hackers can steal them to their benefit.
Lack of Regulation
Web3 is still a relatively new technology, and there are no clear regulations governing its use currently. This lack of regulation could make it easier for hackers to operate undetected.
Social Engineering
As with any network, Web3 is susceptible to social engineering attacks, such as phishing or pretexting, where hackers trick individuals into revealing sensitive information or providing access to their accounts.
Centralized Points of Failure
While Web3 is decentralized, there are still centralized points of failure, such as exchanges or wallets, that could be vulnerable to hacking attacks.
It is important to note that Web3 may have some potential vulnerabilities. These risks reduce with proper security measures, such as secure coding practices, private key management, and robust authentication protocols.
Types of Attacks That Can Occur in Blockchain Tech
Web3 refers to the third generation of the internet. A version of the web that focuses on decentralization, transparency, and employing blockchain technology. As with any technology, Web3 is not immune to hacks and security breaches. Here are some of the different types of hacks that can occur in Web3:
Smart Contract Vulnerabilities
Smart contracts are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. However, if the code is incorrect or contains a vulnerability, hackers may exploit the broken code. Some common smart contract vulnerabilities include reentrancy, integer overflow/underflow, and denial-of-service (DoS) attacks.
Phishing and Social Engineering
Phishing attacks are a common tactic hackers use to steal sensitive information, such as passwords or private keys. In Web3, phishing attacks can take many forms, including fake websites or social media accounts that impersonate legitimate projects or individuals.
Wallet Vulnerabilities
Web3 wallets store and manage cryptocurrencies, but if a wallet is unsafe, it can be vulnerable to hacks. Some common wallet vulnerabilities include weak passwords, private keys stored on a device that is easily accessible, or malicious browser extensions that can steal private keys.
51% Attack
A 51% attack occurs when a single entity controls more than 50% of the network’s computing power, allowing them to manipulate the blockchain. This can lead to double-spending attacks or even the rewriting of the transaction history.
DDoS Attacks
Distributed denial-of-service (DDoS) attacks involve flooding a network or server with traffic to overwhelm it and cause it to crash. This can disrupt Web3 services and prevent users from accessing their wallets or transacting on the blockchain.
Supply Chain Attacks
Supply chain attacks involve exploiting vulnerabilities in third-party software or hardware to gain unauthorized access to a system. In Web3, this can include compromising hardware wallets or other devices used to store private keys.
Bugs
Bugs in smart contracts can lead to security vulnerabilities, which hackers can exploit to steal funds or disrupt operations. For example, a bug in The DAO smart contract in 2016 allowed an attacker to drain over $50 million worth of Ether from the contract.
Scams
Scams are a common tactic hackers use in Web3. These have many forms, such as fake ICOs or phishing websites, and are easy to trick users into sending funds to the attacker’s address. In some cases, scams can even involve the creation of fake tokens or projects with no value.
Reentrancy
Reentrancy is a specific type of smart contract vulnerability that occurs when an attacker can repeatedly call a function within the same transaction. This allows them to manipulate the contract’s state and steal funds. The most well-known example is the 2016 DAO attack, which exploited a reentrancy vulnerability to drain millions of dollars from the agreement.
It’s important to note that new types of hacks and security breaches are constantly emerging as Web3 technology evolves. As such, individuals and companies involved in Web3 need to stay vigilant and take appropriate measures to secure their systems and assets.
THE MOST PROMINENT HACKS OCCURED ON WEB3
Web3 is secure with encryptions, hashes, and keys to protect many vulnerable parts of the internet. And yet these hacks occur due to various reasons.
So, with almost a decade since Ethereum released and 7 years since the DAO attack in 2016, here’s a listicle of the prominent hacks we have in web3:
- The DAO Attack, 2016
- The Parity MultiSig Hack, 2017
- The BitGrail Hack, 2017
- The UpBit Hack, 2019
- The Harvest Finance Attack, 2020
- The Beanstalk Attack, 2021
- The Poly Network Attack, 2021
- The Compound Finance Fiesta, 2021
- The Vulcan Forged Fiasco, 2021
- The Wormhole Hack, 2022
- The Binance Smart Chain (BSC) Hack , 2022
- Euler Finance, March 2023
- Next?
DeFi hacks have had an immense impact on the DeFi economy. The first hack being the DAO Attack in 2016 shook everyone – Especially Ethereum.
And how is a 1.5 yr old Ethereum supposed to know it would be vulnerable and taken advantage of?
That was when everyone got a boon and a bane. The lesson is that Web3 is susceptible to code vulnerabilities and information copied to the dark web where hackers took advantage time and time again.
SOME LESSER KNOWN HACKS IN WEB3
Thank you for reading so far! And as a bonus, here are a list of web3 hacks that you have never heard about before:
- Coindash ICO Hack, 2017, $7.5 M
- Bancor Hack, 2018, $23.5 M
- The Cryptopia Hack, 2019, $16 M
- Cashaa Hack, 2020, $3.1 M
- Etherbase, 2020, $5.4 M
- Origin Protocol, 2020, $7 M
- Warp Finance, 2020, $7.7 M
- Cream Finance, 2021, $37 M
- Vee Finance, 2021, $35 M
- Inverse Finance, 2022, 1 M
One must come to realize how unheard of most of these DeFi applications are. And how so much money is lost in such transactions is a question one can ponder.
Web3 is safe, maybe, just not completely safe yet. Because, if you see closely, Web3 started only a few years/ a decade ago and has a long way to go.
We’ve given time to the internet to do its thing and become awesome for the last 3 decades, why not wait 1 more, maybe then Metaverse and Blockchain may actually function better with respect to security, finance management and global decentralization.
