
Cryptonized is a youtube podcast, analyzing and providing opinions on altcoints, NFTs and crypto. With more than [1.8 million views](https://www.youtube.com/c/Fanaticsmedia/about), it is one of the most successful podcasts in its category. Cyberscope’s COO, Michalis Michelis, joined the podcast’s host, Mark Fidelman, to discuss the process of launching a token, blockchain security and how investors can identify scams.

Our goal is to make Web3 safer for everyone and there is no one better than our company’s COO to help educate investors and crypto enthusiasts [on staying safe](https://www.youtube.com/watch?v=xQbBnLsPgDo&t=507s&ab_channel=Cryptonized) while navigating the crypto space.


Cyberscope’s COO, Michalis Michelis, joined the podcast’s host, Mark Fidelman, to discuss the process of launching a token, blockchain security and how investors can identify scams.

Cryptonized - How to Launch a Token, Blockchain Security and How to find a Scam


## Introduction 

The concept of "Web3" refers to the next version of the internet, utilizing blockchain technology and decentralized applications (dApps) to create a more transparent and secure online environment. Web3 applications differ from traditional web apps by employing a decentralized network of nodes to authenticate transactions and perform added tasks.

Web3 comes with numerous benefits, although it also introduces specific security challenges. Utilizing smart contracts, which are contracts programmed within the blockchain that self-execute, poses a significant challenge. Smart contracts can be vulnerable to various types of attacks such as reentrancy, integer overflow, and denial-of-service attacks.

The security concern arises from the decentralized nature of Web3 apps. Due to the absence of a central authority or server for monitoring security, it could be harder to detect vulnerabilities. Moreover, due to its open-source nature, Web3 allows hackers to easily find vulnerabilities in the code, underscoring the importance of securing Web3 applications to prevent any unauthorized access or attacks.

Conducting specialized penetration testing for Web3 applications is essential due to these specific challenges. Smart contracts, decentralized applications (dApps), and other Web3 elements undergo security testing called "Web3 penetration testing" to uncover vulnerabilities and possible areas of attack. This type of assessment requires expertise, tools, and an understanding of the specific challenges presented by Web3.

## What is Web3 Penetration Testing?

Penetrating testing in web3 is a must for the security testing methods used for web2 applications. Anyone interested in learning Web3 should be aware that there has been a significant increase in momentum in Web3 development. Numerous companies and developers are interested in leveraging web3 technologies and principles to adopt the decentralized web. Web 3.0 is a groundbreaking concept that alters the operations of various sectors like finance, gaming, and supply chain management.

The increasing number of web3 startups is keeping pace with the growing amounts of investment in web3. Yet, the increasing appeal of web3 also opens the door to web3 weaknesses that may result in permanent outcomes. By reading the latest web3 security reports, you will discover that web3 security problems lead to significant financial losses.

In 2022, web3 security breaches resulted in financial losses exceeding $3.5 billion. Furthermore, it has been noted in reports that the losses resulting from web3 security breaches in the initial half of 2023 have exceeded $650 million. Hence, it is crucial to seek out preventative measures that can protect user data, funds, and the integrity of the blockchain structure.

Penetration testing is superior to the most advanced web3 security tools in protecting web3 applications and users. A thorough evaluation process for assessing the security of smart contracts, blockchain networks, and dApps is known as penetration testing in web3. The suggested method for conducting penetration testing in web3 involves replicating actual cyber attacks to pinpoint weaknesses and vulnerabilities in the web3 environment.

Quick link: [Crypto Vulnerability Management Solutions: A Quick Guide](https://www.cyberscope.io/blog/crypto-vulnerability-management-solutions-a-quick-guide)

## Top 5 Things You Need to Know About Web3 Penetration Testing

##### 1. Understanding the Scope and Objectives

Before conducting Web3 penetration testing, it's crucial to clearly define the scope and objectives of the testing. Identify specific targets such as decentralized applications (dApps), smart contracts, or wallets. Establishing clear goals and boundaries helps in accurately identifying and assessing all possible vulnerabilities within the Web3 environment.

##### 2. Importance of Specialized Knowledge

Web3 penetration testing requires a deep understanding of Web3 architecture, technologies, and protocols. Unlike traditional web applications, Web3 apps use distinct tools and frameworks. Knowledge of blockchain technology, smart contract programming languages, and interfaces like JSON-RPC is essential for effective testing. This specialized knowledge enables testers to identify vulnerabilities unique to the decentralized nature of Web3.

##### 3. Methodologies for Testing

Choose appropriate testing methodologies tailored for Web3 environments. Penetration testing in Web3 can be conducted using automated tools or manual methods. Automated tools can quickly identify common vulnerabilities, while manual testing allows for a more thorough and detailed examination of the application. Selecting the right combination of methodologies ensures comprehensive coverage of potential security issues.

##### 4. Types of Web3 Penetration Tests

Web3 penetration testing encompasses various types of tests to identify vulnerabilities across different components:

- External Network Penetration Tests: Simulate attacks from external threat actors to assess the security of the application's perimeter defenses.
- Internal Network Penetration Tests: Evaluate the security of the internal network by simulating insider threats or breaches.
- Application Penetration Tests: Focus on identifying vulnerabilities within the Web3 application itself, such as authentication bypass, and cross-site scripting.

##### 5. Real-World Attack Simulation

Effective Web3 penetration testing involves simulating real-world cyber attacks to uncover weaknesses and vulnerabilities. By replicating actual attack scenarios, testers can better understand how an attacker might exploit vulnerabilities in the Web3 environment. This approach helps in identifying critical security gaps and developing robust strategies to mitigate potential risks.

Understanding these key aspects of Web3 penetration testing ensures a comprehensive assessment of security vulnerabilities, enabling organizations to strengthen their defenses and protect their decentralized applications from potential threats.

Learn also: [What is an Injection Attack on the Blockchain?](https://www.cyberscope.io/blog/what-is-an-injection-attack-on-the-blockchain)

## Traditional Penetration Testing VS Web3 Penetration Tests

Web3 penetration testing varies from traditional penetration testing in numerous aspects. The initial distinction is apparent in the aspect that web3 applications operate in decentralized settings, resulting in unique security vulnerabilities. For instance, weaknesses in smart contracts could create additional opportunities for hackers to launch attacks.

Another factor that sets apart web3 from web2 penetration tests is the incorporation of blockchain technology. Learning web3 reveals that web3 applications possess built-in security characteristics. Nevertheless, the built-in security features were unable to protect web3 apps from weaknesses in the code or methods for engaging with blockchain.

Above all, it is crucial to prioritize the need for specific regulatory requirements for web3 during penetration testing. For instance, DeFi apps need to adhere to financial regulations while looking for weaknesses.

![Types of Penetration Testing ](https://firebasestorage.googleapis.com/v0/b/cyberscope-90197.appspot.com/o/blog%2Fbucket%2F1729687810901-image3.png?alt=media)

## Types of Penetration Testing in Web3

The upcoming subject in a web3 penetration testing guide is different types of penetration tests. It's important to consider that penetration tests simulate attacks on web3 systems and networks to discover vulnerabilities. Simultaneously, you may encounter three different forms of web penetration testing to reduce web3 security vulnerabilities. Here is a summary of the various penetration tests conducted in web3.

### Tests are conducted to assess the security of networks from the outside.

External network penetration tests concentrate on finding weaknesses in the perimeter defenses of web3 applications. In these kinds of penetration tests, you will see simulations of external threat actor attacks. The tests assess the efficiency of security measures like web application firewalls, firewalls, and intrusion detection systems. Conducting an external network penetration test can assist in pinpointing critical vulnerabilities like inadequate password protocols, accessible ports, and outdated software.

### Penetration tests within the organization's network.

The internal network penetration test is the subsequent version used to identify web3 vulnerabilities. Internal network penetration tests involve simulating scenarios in which a malicious actor infiltrates the internal network of web3 applications. These penetration tests are designed to pinpoint internal vulnerabilities like improperly configured access controls, inadequate network segmentation, and unprotected databases.

### Penetration Testing for Applications.

Web3 security experts should also prioritize conducting application penetration tests to identify weaknesses within the application. Incorporating application penetration tests into web3 security audits is crucial for identifying security vulnerabilities like authentication bypass, SQL injection, and cross-site scripting. Penetration testing of applications is an effective method to protect user data privacy and prevent unauthorized access.

[Cyberscope’s](https://www.cyberscope.io/penetration-testing-service) penetration testing services include real-world attack simulations to provide a realistic assessment of security defenses. Their thorough approach ensures that organizations are well-prepared to handle actual threats.

## Web3 Penetration Testing Components

Penetration tests in Web3 go beyond merely simulating attacks on the perimeter of web3 apps, their internal networks, and the application itself. They include various components designed to uncover a wide range of vulnerabilities. These components are smart contract audits, blockchain testing, wallet software testing, and DevOps penetration testing. Each plays a crucial role in ensuring the security of different aspects of Web3.

1. Smart Contract Audits: [Smart contracts](https://www.cyberscope.io/smart-contract-audit) are pivotal in the Web3 ecosystem, making their audits essential. Smart contract audits test access control, transaction order dependency, vulnerability to denial of service, and asset management capabilities. Common vulnerabilities identified include time manipulation, insufficient access controls, reentrancy attacks, and short address attacks.
2. Blockchain Testing: Blockchain testing evaluates vital components and potential attack surfaces within the blockchain. It involves checking peer-to-peer protocol vulnerabilities, blockchain block parsing, RPC authentication, and secure RPC method implementation. Typical attack surfaces identified include communication interfaces, OS and services, DevOps, and input management.
3. DevOps Penetration Tests: DevOps penetration testing focuses on assessing code repository contents and access privileges, secrets management, and access to production deployment. Given its extensive technological footprint and limited security controls, DevOps is an attractive target for malicious actors.

![Benefits of Penetration Testing ](https://firebasestorage.googleapis.com/v0/b/cyberscope-90197.appspot.com/o/blog%2Fbucket%2F1729688028050-image1.jpg?alt=media)

## Benefits of Penetration Testing 

Penetration testing offers numerous benefits, particularly in enhancing an organization's security posture. Here are some key benefits:

##### 1. Identifying Vulnerabilities

Penetration testing helps in uncovering vulnerabilities in a system, network, or application that attackers could exploit. By identifying these weaknesses, organizations can take proactive measures to address them before they are exploited.

##### 2. Protecting Reputation

Security breaches can damage an organization's reputation and erode customer trust. Regular penetration testing helps prevent breaches, protecting the organization's reputation and maintaining customer confidence.

##### 3. Improving Security Posture

Penetration testing provides detailed insights into an organization’s security strengths and weaknesses. This enables the organization to improve its overall security posture by implementing effective security measures and controls.

##### 4. Cost Savings

Addressing security vulnerabilities proactively through penetration testing can save organizations significant costs associated with data breaches, including legal fees, remediation costs, and loss of business.

### Conclusion

In the evolving landscape of Web3, the importance of robust security measures cannot be overstated. Web3 penetration testing emerges as a critical practice to safeguard decentralized applications, smart contracts, and blockchain networks from potential vulnerabilities and cyber threats. By understanding the unique challenges and requirements of Web3 environments, organizations can effectively identify and mitigate risks through specialized knowledge, appropriate methodologies, and real-world attack simulations.

Implementing comprehensive Web3 penetration testing helps organizations achieve a strong security posture, protect user data, ensure compliance with regulatory standards, and maintain trust within the Web3 ecosystem. As the adoption of Web3 technologies continues to grow, staying ahead of security challenges through proactive and thorough penetration testing will be key to securing the future of decentralized applications and blockchain technologies.


Web3 penetration testing identifies vulnerabilities in dApps, smart contracts, and blockchain networks to defend against cyber threats and improve security.

Web 3.0 Penetration Testing: Top 5 Things You Need To Know


## What is zkSync?

zkSync is a leading Layer 2 scaling solution for Ethereum, utilizing zero-knowledge rollups (zk-rollups) to provide faster and more cost-efficient transactions. To leverage zkSync's benefits effectively, you need a compatible wallet. Here’s an in-depth guide to the top five zkSync wallets, covering features, transaction fees, security, customer support, and user feedback.

zkSync is a technology developed by Matter Labs designed to address Ethereum’s scalability challenges. By utilizing zero-knowledge rollups, zkSync allows for faster and cheaper transactions compared to Ethereum’s mainnet while maintaining high security.

## How Does zkSync Work?

1. **Zero-Knowledge Rollups (zk-Rollups):**

   Batching Transactions: zkSync aggregates multiple transactions into a single batch. These batches are processed off-chain, which reduces the burden on the Ethereum mainnet.

   Proof Generation: A cryptographic proof (zero-knowledge proof) is generated to confirm the validity of the batch. This proof is then submitted to the Ethereum mainnet, which verifies the batch’s correctness without needing to process each transaction individually.

2. **Security and Data Availability:**

   Security: zkSync inherits the security of Ethereum by anchoring its proofs on the mainnet. This ensures that even though transactions are processed off-chain, they are still secured by Ethereum’s robust security infrastructure.

   Data Availability: Transaction data is stored on-chain in a compressed format, ensuring that data can be recovered and verified if needed.

3. **Scalability:**

   Higher Throughput: By processing transactions off-chain and batching them, zkSync significantly increases the transaction throughput compared to Ethereum's Layer 1.

   Lower Fees: The cost of transactions on zkSync is lower because the system reduces the amount of data and computation required on Ethereum’s mainnet.

Learn also: [Real World Assets (RWA) in Crypto: Everything You Need to Know](https://www.cyberscope.io/blog/real-world-assets-rwa-in-crypto-everything-you-need-to-know)

## What You Get With zkSync

By using zkSync, you receive:

1. **Reduce the cost of gas:** Pay only 1% of the cost compared to the main Ethereum network. And more affordable than utilizing optimistic rollups.
2. **Quick transactions:** More than 2000 transactions per second are possible, in comparison to only 14 tps on the primary network.
3. **Security:** The Ethereum blockchain ensures the protection of your transactions.
4. **Simple transactions:** Transfer your digital currency seamlessly and swiftly between the Ethereum main network and Layer 2.
5. **Freedom:** You have the option to transfer your funds back to the primary Ethereum network at any time.

However, a high-quality wallet is essential for utilizing all the features available in the zkSync ecosystem. Wallets assist in purchasing, trading, and securely storing cryptocurrency. You can also discover DeFi and NFTs through them. Accessing zkSync is not possible yet through exchanges such as Coinbase or Binance. Therefore, you should be aware that these are some of the best zkSync wallets.

## Top Cryptocurrency Wallets on zkSync

## 1. Holdstation Wallet

![Holdstation Wallet](https://firebasestorage.googleapis.com/v0/b/cyberscope-90197.appspot.com/o/blog%2Fbucket%2F1727940539588-image5.png?alt=media)

Overview\
Holdstation Wallet, based in Singapore, offers a robust solution for managing various digital assets including coins, tokens, and NFTs. As a non-custodial wallet, it gives users full control over their private keys and transactions, making it a leading choice in the zkSync Era ecosystem.

**Key Features**

**Security:** Undergoes thorough security audits by Verichains and integrates zkSync for enhanced protection. The 'Revoke' feature allows users to monitor and revoke contract access, reducing asset loss risk.

**zkSync Integration:** Enables fast, cost-effective transactions with zkSync, a Layer 2 scaling solution, and supports Account Abstraction (AA) for efficient token swaps and gas fee payments.

**Holdstation DeFutures:** A futures trading platform that supports high leverage across various assets while keeping funds securely in the user’s wallet.

## 2. BlockWallet

![BlockWallet](https://firebasestorage.googleapis.com/v0/b/cyberscope-90197.appspot.com/o/blog%2Fbucket%2F1727940659062-image4.png?alt=media)

BlockWallet is a highly secure browser extension wallet designed to ensure privacy for your funds. It employs advanced privacy technologies to make it virtually impossible to trace the origin of your money. When you withdraw funds, BlockWallet generates a new address that is not linked to any of your previous transactions.

**Privacy Features:**

**Supports Privacy-Enhancing EVM Chains:** Utilizes chains that are built to enhance privacy.

**IP Address Masking:** Conceals your IP address to further protect your privacy.

BlockWallet is ideal for users who prioritize privacy and anonymity in their transactions.

## 3. Rabby

![Rabby Wallet](https://firebasestorage.googleapis.com/v0/b/cyberscope-90197.appspot.com/o/blog%2Fbucket%2F1727940789860-image6.png?alt=media)

Rabby Wallet is a non-custodial wallet designed for Ethereum that connects to decentralized applications (dApps). Unlike MetaMask, Rabby offers additional features that enhance its functionality:

**Special Features:**

**Multi-Chain Support:** Connects to 44 different blockchain networks and automatically selects the correct chain for transactions. You can also manually switch chains if desired.

**Pre-Signature View:** This allows you to see the details of a transaction before you approve it, including how your balance will be affected.

**Risk Assessment:** Check the safety of transactions before you sign, alert you to potentially risky deals, and verify the legitimacy of addresses.

Rabby is an excellent alternative to MetaMask with its enhanced features and automatic chain selection.

## 4. Argent Wallet

![Argent Wallet](https://firebasestorage.googleapis.com/v0/b/cyberscope-90197.appspot.com/o/blog%2Fbucket%2F1727940924001-image3.png?alt=media)

Overview\
Argent Wallet is a non-custodial wallet designed to simplify access to DApps and asset recovery without the need for seed phrases. It supports a wide range of networks, including Ethereum, Starknet, and zkSync.

**Key Features**

**User-Friendly Access:** Eliminates seed phrases for easier recovery.

**Wide Network Support**: Includes Ethereum, Layer 2 solutions, Starknet, and zkSync.

**Argent X for Developers:** Offers a specialized wallet for developers on the Starknet network.

**zkSync Integration:** Available on mobile apps for zkSync 1.0 (zkSync Lite), though zkSync Era 2.0 is not supported in these versions.

## 5. xRaise

![xRaise](https://firebasestorage.googleapis.com/v0/b/cyberscope-90197.appspot.com/o/blog%2Fbucket%2F1727940999804-image2.jpg?alt=media)

xRaise is a prominent wallet within the gaming community, designed specifically for gamers with a focus on smart contracts and gaming functionality. Its user-friendly interface is intuitive, making it accessible even for beginners.

**Key Features:**

**zkSync Integration:** Fully compatible with any app in the zkSync ecosystem.

**Account Abstraction:** Allows interaction with smart contracts without the need to manage private keys, offering enhanced security and flexibility.

**Session Keys:** Enables you to sign transactions in advance, so you can play games uninterrupted. This feature eliminates the need to pause your game for wallet interactions.

**Social Recovery:** Provides a system to help recover your wallet if needed, enhancing security.

**Payment Scheduling:** Allows you to set up and schedule payments for subscriptions, in-game purchases, and even payroll.

xRaise is particularly suited for gamers who want a secure and seamless wallet experience without interrupting their gaming sessions.

## Benefits of ZKsync

zkSync provides several key benefits that enhance the Ethereum network’s scalability, efficiency, and user experience:

1. **Scalability:** zkSync significantly increases transaction throughput by using zk-Rollups to bundle multiple transactions into a single proof. This allows the network to handle a higher volume of transactions per second compared to the Ethereum mainnet.
2. **Cost Efficiency:** Transactions on zkSync are much cheaper than on Ethereum’s mainnet. By aggregating multiple transactions into a single proof, zkSync spreads the cost across many transactions, reducing fees for users.
3. **Speed**: zkSync reduces transaction times by processing them off-chain and only posting aggregated proofs to the Ethereum mainnet. This results in faster transaction confirmation and processing.
4. **Security:** zkSync uses zero-knowledge proofs (ZK-SNARKs) to ensure the validity and security of transactions. This method maintains strong security guarantees while keeping transaction details private and secure.
5. **User Experience:** zkSync improves user experience with lower fees and faster transactions, making it more practical for everyday use cases like payments and DeFi interactions. This also enhances the overall usability of decentralized applications (dApps) built on the platform.
6. **Interoperability:** zkSync is compatible with Ethereum, allowing developers to build and deploy dApps with minimal changes. This interoperability supports a seamless integration with existing Ethereum-based projects and services.
7. **Decentralization:** zkSync maintains Ethereum’s decentralization ethos by utilizing its Layer 2 solution, which operates on top of the mainnet while benefiting from its security and consensus mechanisms.
8. **Developer-Friendly:** zkSync provides developer tools, including SDKs and APIs, which make it easier to integrate its technology into applications. This support helps accelerate the development and adoption of zkSync-powered solutions.

Overall, zkSync addresses many of Ethereum’s limitations, offering a more scalable, cost-effective, and user-friendly solution for handling transactions and interacting with decentralized applications.

Quick link: [What is an Injection Attack on the Blockchain?](https://www.cyberscope.io/blog/what-is-an-injection-attack-on-the-blockchain)

## Conclusion

zkSync provides a transformative solution for Ethereum by enhancing scalability, reducing transaction costs, and speeding up processing times through its zero-knowledge rollups technology. With significant improvements in throughput and lower fees, zkSync addresses many of Ethereum's limitations while preserving its security and decentralization. By integrating with zkSync-compatible wallets, users can efficiently manage their assets, access decentralized applications, and enjoy a seamless experience in the Ethereum ecosystem.

Each of the top zkSync wallets—Holdstation, BlockWallet, Rabby, Argent, and xRaise—offers unique features tailored to different needs, whether it's privacy, multi-chain support, or gaming. Embracing zkSync and its compatible wallets can greatly enhance your interactions with Ethereum’s expanding Layer 2 ecosystem.


Top 5 zkSync wallets for faster, secure Ethereum transactions using zk-rollups: Holdstation, BlockWallet, Rabby, Argent, and xRaise.

The Top 5 zkSync Wallets

A Beginner’s Guide to Web3 Security

Technological progress is essential in shaping people's daily lives globally, while also transforming their digital interactions. Web3 stands out as one of the key highlights of recent technological advancements. Web3 leverages blockchain technology to offer the advantages of decentralization and create possibilities for a user-focused, transparent, and safe online environment. Nevertheless, the growing worries about web3 security have also presented a new challenge for web3 specialists. Securing digital assets and ensuring data privacy is crucial for fostering the advancement and expansion of the web3 ecosystem. Decentralization within web3, combined with intricate cryptographic processes, has the potential to establish the basis for web3 security. Let's explore web3 security further and discover how to attain security for web3 solutions through strategic methods.

*Learn more: [Crypto Vulnerability Management Solutions: A Quick Guide](https://www.cyberscope.io/blog/crypto-vulnerability-management-solutions-a-quick-guide)*



## Establishing the Security of Web3

One can gain the utmost understanding of web3 security by studying the fundamental principles of web3. Understanding the basic principles of web3 can help you discover the meaning of web3 security. Web 3.0 represents a change in how the Internet is structured to transfer the focus of Internet interactions to users. The initial iteration of the Internet, referred to as Web 1.0, limited users to only accessing static content on websites.

The emergence of Web 2.0 facilitated the realization of the capabilities of user-generated content. Simultaneously, web 2.0 also highlighted issues of centralization that resulted in an uneven distribution of power between users and platform owners. Moreover, web 2.0 also provided the perfect environment for the increase of various data privacy risks, cybersecurity worries, and fraud.

The issues with Web 2.0 were the driving force behind the development of the principles of Web 3.0. To understand web3 security, it is essential to know the foundation of web3. The majority of the definitions of web3 describe it as the upcoming update in the series. However, it is important to recognize that web3 represents a significant step forward in technology and a shift in the way we view the Internet. Decentralized ledgers and databases containing distributed nodes in an open network decrease the chances of the Internet being monopolized. Furthermore, utilizing blockchain for cryptographic security enhances security confidence in web3.

*Quick link: [What Is Consensus in Blockchain?](https://www.cyberscope.io/blog/what-is-consensus-in-blockchain)*



## Potential Risks of Web3 Security Features?

The benefits of web3 highlight its potential to transform how online experiences are viewed. It is crucial to recognize how the characteristics of web3 may result in security vulnerabilities. Any web3 security training would highlight the flaws in the web3 design that result in security vulnerabilities.

To begin with, a constraint can be observed in employing blockchain technology or distributed ledger technology to enable decentralization in web3. Decentralization provides transparency, but it can also result in higher risks of fraud and manipulation.

One other notable aspect of web3 is its emphasis on identity and tokenization. Blockchain technology allows for authentication and control over assets through the use of distinctive hashes. Furthermore, you can depend on the benefits of smart contracts to guarantee authentication. Nevertheless, smart contract vulnerabilities pose a potential threat to the security of web3 infrastructure.

Web3 security tools place significant emphasis on the concept of zero trust as well. Web3 is based on the idea of data moving directly between peers in decentralized apps, eliminating the need for intermediaries. A lack of trust raises worries about responsibility in case of security breaches or malicious attacks.

![Systematic Risks and Addressable Risks](https://firebasestorage.googleapis.com/v0/b/cyberscope-90197.appspot.com/o/blog%2Fbucket%2F1726172384090-image3.jpg?alt=media)



## What Are the Main Security Risks in Web3?



There are two main types of vulnerabilities in web3 security: systematic risks and addressable risks. Systemic risks are web3 security risks that users have no control over. Some instances of systematic risks are technical malfunctions of blockchain networks, fluctuation in the crypto market, detrimental laws, or shutdowns.

However, users also need to be concerned about security threats like phishing, private key theft, and smart contract vulnerabilities. There is hope for web3 security improvements through early-stage proactive measures. Let's examine some of the main categories of security threats that can be mitigated with the best practices in web3 security.

1. Social Engineering Attacks

Social engineering attacks, which exploit users' vulnerabilities, are the most prevalent security attacks in web3. Examples that stand out when discussing "What is web3 security?" are smart contract vulnerabilities, rug pulls, and phishing scams. These are illustrations of social engineering attacks in web3. Smart contract logic hacks involve manipulating smart contract code to impact various functions and services such as crypto wallets, interoperability, and project governance.

In the same way, rug pulls entail generating excitement for a project and manipulating the faith of web3 users to attract additional investments. After obtaining essential information, scammers abruptly close down their operations and vanish mysteriously. The new web3 security tools collection also emphasizes identifying problems such as phishing. Fraudsters may use emails or messages to carry out phishing schemes, pretending to be a well-known person or a reputable company. The majority of recent web3 attacks have targeted human weaknesses.



2. Data Risks 

The progress in web3 is dependent on an expanded network framework involving numerous participants, interfaces, and storage systems. Blockchain transactions benefit from encryption. Decentralization decreases the chances of censorship while also decreasing the vulnerabilities of single points of attack. Yet, maintaining security in web3 is difficult due to the potential for data exposure in blockchain transactions.

Data availability, data manipulation, and data authenticity are among the significant risks that data in web3 faces. Furthermore, worries about data security risks also involve minimal centralized supervision. Who will be accountable for monitoring malicious and anonymous users in distributed systems or the metaverse? The absence of centralized supervision raises concerns about the security of the wider web3 ecosystem.

3. Economic and Social Threats

The upcoming focus in a web3 security tutorial would address the financial rewards in addition to community hazards. The majority of web3 applications feature novel financial assets and separate currencies, leading to the formation of a self-contained economy within web3. The economic structures integrated into web3 solutions motivate hackers.

It is equally crucial to assess the dangers of web3 security for consumers, the environment, and society. Companies should aim to address inquiries about backing accessibility and societal advancement while also cultivating user and business trust in web3.

4. Identity and Privacy

The primary benefit of utilizing web3 applications is the solution to issues concerning data privacy and confidentiality. Nevertheless, security faces obstacles due to anonymity and self-sovereign identity (SSI) mechanisms. Simultaneously, the transparency of public blockchains results in the compromise of anonymity, though it comes with privacy trade-offs. In the web3 security course topics, there is an extensive review available on identity risks, including examples of risks to compliance and user experience. For instance, both SSI and crypto wallets have a complex registration process and restricted compatibility.

Regulators are worried about the lack of access to user identity data due to Web3's anonymity. Therefore, it could expose the possibilities for dangers related to funding terrorism and illegal money activities. Additionally, decentralized IDs may result in challenges with current regulations. Most notably, anonymity's secrecy raises concerns about accountability, consumer rights, and protection of societal standards.

![Common Web3 Security Safeguards](https://firebasestorage.googleapis.com/v0/b/cyberscope-90197.appspot.com/o/blog%2Fbucket%2F1726172527422-image1.jpg?alt=media)

## Common Web3 Security Safeguards?

1. Smart Contract Security

* Rigorous Smart Contract Audits: Investing in comprehensive [audits](https://www.cyberscope.io/smart-contract-audit) by experienced security professionals is essential. These audits involve a meticulous review of your smart contract code to identify vulnerabilities and ensure adherence to best practices. This helps in minimizing the risk of exploits and bugs that could compromise the integrity of the smart contract.
* Formal Verification: This technique uses mathematical proofs to verify that smart contract code functions as intended. Formal verification helps in identifying logical errors and ensures that the code performs correctly under all conditions, significantly reducing the risk of bugs and exploits.
* Open-Source Libraries with Proven Track Records: When incorporating libraries into your smart contracts, choose open-source options with a history of security and regular updates. These libraries are vetted by the community and have demonstrated reliability, reducing the risk associated with untested or less reputable code.
* Continuous Monitoring and Upgrades: Regularly monitor deployed smart contracts for any unusual activities or vulnerabilities. Stay updated with the latest security practices and upgrade contracts as needed to address emerging threats.

2. Custodial Wallet Security

* Periodic Penetration Testing and Vulnerability Assessments: Conduct regular [penetration tests](https://www.cyberscope.io/penetration-testing-service) and vulnerability assessments to uncover and address security weaknesses in your custodial wallet infrastructure. This proactive approach helps in identifying potential risks before they can be exploited by attackers.
* Multi-Party Computing (MPC): Utilize MPC technology to enhance wallet security by distributing private key management across multiple servers. This decentralized approach makes it more challenging for [attackers](https://www.cyberscope.io/blog/what-is-an-injection-attack-on-the-blockchain) to gain access to user funds, as compromising a single server is insufficient to access the private keys.
* Hardware Security Modules (HSM): Employ HSMs to securely store and manage private keys. These tamper-resistant devices provide an additional layer of protection by ensuring that cryptographic operations and key storage are performed securely and protected against physical and cyber threats.
* Strong Access Controls and Monitoring: Implement robust access control mechanisms, including multi-factor authentication (MFA) and real-time user activity monitoring. These measures help in detecting unauthorized access attempts and preventing potential breaches.

3. High-Frequency Trading (HFT) Attack Mitigation

* Transaction Validation and Price Limiting: Implement strong transaction validation procedures to ensure data integrity and prevent tampering. Additionally, apply rate-limiting to mitigate denial of service (DoS) attacks and manage the volume of transactions to prevent overloads.
* Stress Testing and Backtesting: Perform regular stress tests to simulate high-transaction volumes and identify potential bottlenecks or vulnerabilities. Backtesting involves analyzing historical data to uncover security risks and refine systems to handle various scenarios effectively.
* Secure Coding and Code Review: Adhere to secure coding practices to protect against vulnerabilities during development. Implement thorough code review processes to catch and rectify issues before deployment, ensuring that the codebase is robust and secure.
* Anomaly Detection Systems: Incorporate advanced anomaly detection systems to identify unusual trading patterns or activities that could indicate potential attacks or exploits. These systems can provide early warnings and help in responding swiftly to threats.

By implementing these strategies and best practices, Web3 projects can significantly enhance their security posture and protect against a range of potential risks.

*Read also: [What is Trap Phishing and How You Can Protect Yourself](https://www.cyberscope.io/blog/what-is-trap-phishing-and-how-you-can-protect-yourself)*



## Best Practices for Web3 Security Compliance

1. API Query Encryption and Signing\
   In Web 2.0, Transport Layer Security (TLS) significantly improved the security of HTTP requests and responses. For Web3 decentralized applications (DApps), implementing encryption and digital signing of API queries and responses is equally vital. This practice ensures the protection of application data and prevents unauthorized access or tampering.
2. Utilize Web 2.0 Security Measures\
   Web 2.0 has provided a wealth of knowledge and tools to combat various security vulnerabilities, including Web Application Firewalls (WAFs), bot management, and API security measures. These methods, proven effective over decades, remain crucial for protecting user accounts, preventing code injection, and blocking cross-site scripting, among other threats.
3. Strong Code Auditing Before Deployment\
   While code auditing has always been important, many organizations often rush or skip this step in the pursuit of quick releases. In Web3, however, the process is more complex due to the decentralized nature of updates, which require network consensus. Therefore, identifying and addressing security vulnerabilities before deployment is essential. Thorough code auditing is crucial to ensure that any issues are resolved before release, rather than after the fact.



## Conclusion

Securing Web3 applications and infrastructure is essential for fostering trust and ensuring the success of the decentralized web. As Web3 evolves, understanding its foundational principles and addressing potential risks becomes crucial. By focusing on smart contract security, custodial wallet protection, and high-frequency trading safeguards, stakeholders can mitigate a range of vulnerabilities. 

Additionally, implementing best practices such as API query encryption, leveraging Web 2.0 security measures, and conducting rigorous code audits can significantly enhance security. As Web3 continues to grow, adopting a proactive and comprehensive approach to security will be key to overcoming challenges and unlocking the full potential of this transformative technology.

Discover Web3 security basics, from smart contract audits to wallet protection.

Web3 Security Compliance: A Complete Guide

## What is Web3

 Web 3.0, is the third stage of the Internet at the moment. It is claimed that Web 3.0 will be decentralized and completely democratized and it will have a bottom-up approach based on blockchain technologies and improvements in the Semantic Web that defines the internet as a system of linked data with meanings.

 Most of the change enables individuals to be more influential over their information, with particular attention to privacy and safety or worries that were common in the early days of the Internet.

Cryptocurrencies, decentralized applications, and smart contracts are growing up fast in Web 3.0 which is about transparency, empowering users, and secure and irreversible transactions. They want to create a just internet platform that focuses on its users. The goal is to establish an equitable internet platform that is centered on its users.

## Cybersecurity Features Web 3.0

Web 3.0, which is decentralized, comes with several advantages, such as increased personal data privacy and control. Nevertheless, efforts to establish a safer setting involve the ongoing development of these additional characteristics.

**1. Native identity** 

Web 2.0 is widely recognized for its incidents of data breaches. Typically, individuals needed more authority over how organizations utilized collected information. Data collection became an issue, and major platforms' data centers became valuable repositories of important data.

Given that centralized options do not ensure data security or protect privacy, an alternate approach is necessary. In Web 3.0's identity-native ecosystem of distributed apps, users have the power to manage their data and content. Smart contracts safeguard user privacy by enabling access to data without revealing personal information. Web applications might determine user privileges or qualifications depending on their online reputation. Therefore, Web 3.0 is expected to experience a decrease in major data privacy breaches because it relies less on centralized gatekeepers such as technology companies.

**2. Decentralized technologies**

Decentralized technologies like Decentralized finance (DeFi) are financial systems that do not require intermediaries, allowing for clear borrowing, lending, and sharing of digital assets. It improves access to financial services by cutting out third-party participation. 

**3. dApps** 

These dApps are software applications that run on the blockchain or a distributed network instead of running on one single server. They offer privacy, freedom of speech, and flexibility to grow without central control.

## Cybersecurity risks of Web3

Despite its strong security measures, Web3 is still vulnerable to cybersecurity threats. The initial step in addressing potential security issues is to comprehend them.

**Weaknesses in smart contracts**

Deficiencies in smart contracts on blockchain networks may lead to unauthorized entry or monetary harm. Reviewing these contracts is crucial to catching and resolving problems at an early stage.

**Phishing attacks**

Phishing attacks trick individuals into giving away sensitive information, commonly focusing on crypto wallet users via fake emails or websites. Teaching users and setting up two-factor authentication can lower the chances of these dangers.

**Front-running**

Front-running in decentralized finance (DeFi) happens when an individual takes advantage of insider information on transactions for their benefit, jeopardizing the integrity and safety of the decentralized applications.

**Sybil assaults**

During a Sybil attack, an individual generates numerous fake identities to interfere with a decentralized network. Strong identity and access management solutions are crucial to avoid these problems.

**Attacks that make up 51% of the total**

When one entity controls over half of a blockchain's computational resources, it can manipulate the network. Spreading out mining power and strengthening blockchain security can help to avoid such attacks.

**DeFi vulnerabilities**

Weaknesses in DeFi platforms' security can result in substantial financial losses. It is essential to conduct routine checks on these platforms and their smart contracts to identify and resolve any vulnerabilities.

**Concerns regarding privacy**

Despite the improvements in transaction privacy with blockchain technology, there remains a possibility of unintentional exposure of identity.

## Conclusion


In the changing landscape of Web3, cybersecurity remains essential as decentralization and blockchain technology redefine the internet. Web3 provides advantages such as improved privacy, greater control of personal information, and heightened transparency. Nevertheless, it also presents distinct security obstacles. Moving from centralized to decentralized systems requires strong security measures to defend against risks like smart contract flaws, phishing scams, and DeFi breaches.
Effective cybersecurity for Web3 means covering all the bases. Adopting a zero-trust approach, we make sure not to automatically trust any of the users or systems, even if they're already inside our network. This helps us stay vigilant and better protect our digital environment. We use advanced threat detection to spot potential issues quickly and secure all our devices, networks, and cloud environments. Key steps include managing who has access to what, encrypting our data, and conducting regular security audits. These measures help reduce risks and keep our systems safe and trustworthy, even when they're spread out across different locations.
As businesses and users adopt Web3 technologies for their potential to innovate and empower, prioritizing cybersecurity is essential. By integrating thorough strategies and staying alert to new threats, organizations can create a secure environment that supports the integrity, resilience, and principles of decentralization. This way, Web3 can achieve its promise of a more transparent, fair, and user-focused digital future.

Explore cybersecurity in Web3, focusing on the benefits of decentralization and blockchain, and key risks like smart contract flaws and phishing.

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