While Web3 strives to transform the internet and reshape industries using new technologies, the nascency of this web iteration presents multiple challenges. Advancing as one of the most pressing concerns is cybersecurity. A recent report underlined more than 167 significant attacks that resulted in a total loss of $3.6 billion in 2022 – this marked an alarming upsurge of 47% compared to the loss of $2.4 billion in 2021.
Cyber threats stem from various reasons, including the intricacy of blockchain and diverse Web3 tech. However, to understand the security gaps in Web3, it is essential to grasp the evolution of the web and its foundational building blocks.
While the first incarnation of the internet in the 1990s or early 2000s comprised open protocols on which anyone could build, the paradigm shifted to the second and current phase, Web2. Comprehended as the centralized version of the Internet, Web2 or the socially interactive web consolidates governance and functionality within specific entities, resulting in controlled data. However, the third iteration of the Internet, Web3, is built upon the core concepts of decentralization and open Internet and aims to disrupt the existing web conventions. Let’s take a closer look at the building blocks of Web3.
● Decentralization: Traditional Web2 applications relied on centralized servers and intermediaries to manage data and facilitate interactions, leaving critical user data susceptible to manipulation or deletion. However, Web3 leverages decentralized technology like blockchain to distribute data and computation across the entire network. Without a central authority, data remains visible to all nodes and requires network consensus before alteration or deletion.
● Trustless: Web3 technologies employ cryptography in smart contracts, especially hashing, to encrypt data from unauthorized access and potential misuse. Cryptography serves as a foundation for the entire Web3 ecosystem as it cultivates a trustless, more secure and reliable environment.
● Consensus: Participating nodes must reach a consensus for a block to be added or modified within the blockchain system. Consensus is established when all the nodes agree and ensure that the blocks are correctly added to the chain or the message stored by the node is correct. This consensus mechanism serves to thwart malicious attacks like "fork attacks." Blockchain networks utilize different consensus mechanisms for validation, for instance, proof-of-work (PoW) and proof-of-stake (PoS).
Web3 is rapidly evolving, and given its edge over prior web iterations, it is not unrealistic to envision mainstream adoption. However, attaining this will primarily rely on effective addressal of emerging cybersecurity challenges.
Web3, despite adopting blockchain-based infrastructure, still encounters traditional Web2 challenges: malware payloads, phishing, bot attacks, and SIM swipes. Additionally, it is vulnerable to novel exploits like smart contract hacks, flash loan attacks, cryptojacking, rug pulls, and ice phishing. Moreover, the inherent complexity of the Web3 interface further amplifies the risks.
Below are some primary security gaps in Web3.
● Lack of encryption and verification for API queries. Given the anonymity and decentralized features of Web3 tech, it should be imperative to sign all the API queries cryptographically. Note that—to date, Web3 API queries are not cryptographically signed, making critical data susceptible to breaches by unauthorized parties. Besides this, without robust encryption, APIs act as an entrance for cyber attacks, including Distributed Denial-of-Service (DDoS) attacks, where attackers flood an API with excessive traffic to disrupt services; Code Injection attacks, involving the injection of a malicious code to manipulate or alter data; Man-in-The-Middle (MiTM) attacks, where attackers relay or alter communications between APIs.
● Governance and regulation uncertainties: No central authorities across the globe are responsible for regulating Web3, coupled with its snowballing adoption, which has exacerbated scams and frauds to unprecedented levels. These fraudulent activities encompass Ponzi schemes, rug pulls, flash loan attacks, smart contract hacks and more. All of which pose users with critical financial and data loss.
● Data Security: Data security in Web3 raises critical concerns. Unlike the Web2 model, where access to the database is confined to specific entities, data stored on a blockchain is accessible to all the connected nodes. This exposes data to the risk of manipulation. In addition, decentralized oversight increases the susceptibility to numerous exploits, including DDoS, code injection and more.
● Scalability and performance issues due to slow updates: Scalability and performance issues loom large in Web3. While the decentralized web promises faster speed than the centralized web, it is much slower, given the need for consensus among authentication nodes. Furthermore, Layer-1 blockchains like Ethereum struggle to maintain performance when transaction volume surges, leading to higher gas fees.
Addressing these multifaceted challenges and security gaps is increasingly imperative for unlocking Web3's full potential and widespread adoption.
Implementing the strategies listed below is an effective way forward to mitigate Web3 security challenges.
● API Query Encryption and Signing: The integration of Transport Layer Security (TLS) for HTTP requests and responses significantly bolstered the security landscape of Web2. Similarly, incorporating encryption and digital signatures for API queries and responses for Web3 DApps will be crucial in protecting data from API attacks.
● Web Application Firewalls (WAF) and Other Web2 Measures: Businesses now have decades of expertise defending against Web2 security vulnerabilities. While that does not undermine the severity of the susceptibilities, it underscores the existence of established solutions to protect user data, prevent code injection, and mitigate cross-site scripting, among other attacks. In addition, Web application firewalls (WAFs), bot management, and API security measures also combat a wide array of attack vectors for application front-ends.
● Smart Contract Auditing: Prioritizing a comprehensive audit of the underlying smart contract code is essential to pre-detect potential vulnerabilities and mitigate them before contract deployment. Organizations can engage a reputable and experienced third-party security auditor since these experts have the knowledge and tools to discover possible bugs and security flaws that in-house security teams might overlook.
● Real-time Monitoring: Real-time monitoring ensures the delivery of continuously updated data about systems, processes, or events, so there is minimal delay between data collection and analysis. It allows rapid detection of abnormalities, performance issues, and critical events.
● Key Management System (KMS): Cryptographic keys are pivotal in the Web3 paradigm, serving various essential functions such as data encryption, decryption, and user authentication. Compromising any cryptographic key poses a severe threat, potentially resulting in the complete breakdown of an organization's security framework. Attackers accessing cryptographic keys can decrypt sensitive data and breach classified information. Implementing a Key Management System (KMS) will help safeguard keys throughout their lifecycle, ensuring their security during transactions and storage.
As the leading global cloud provider, Alibaba Cloud recognizes the importance of cybersecurity and provides state-of-the-art security solutions that empower enterprises, SMBs, and developers to construct, expand, and fortify Web3 applications.
Businesses can identify, monitor, and address host/container security issues such as system vulnerabilities and web tampering with Alibaba Cloud Security Center. It is a centralized security management system that enables businesses to avoid data leakage and privacy violations. Organizations across industries can safeguard digital wallet private keys from tampering and theft during transactions and storage by leveraging Alibaba Cloud Key Management Services (KMS). They can also seamlessly integrate KMS with various Alibaba Cloud services for native encryption features and enhanced security functionalities.
With Alibaba Cloud, it’s also easy to protect smart contracts against malicious operations with Trusted Execution Environments (TEE) to enhance data security, integrity, and confidentiality. Moreover, the eKYC solution from Alibaba Cloud ensures that only verified users participate in transactions and other business operations of smart contracts, with a policy-based approach for digital identities. Moreover, businesses can monitor and identify abnormal activities, such as suspicious transactions and malicious addresses, in real-time to prevent potential losses and minimize business risks proactively with Alibaba Cloud Fraud Detection. This risk management solution features real-time analysis and accurate identification.
Alibaba Cloud’s comprehensive suite of security services, including Anti-DDoS and WAF, ensures multiple layers of defense mechanisms to safeguard enterprises against sophisticated attacks. Alibaba Cloud reinforces the security of applications and strives to eradicate cyber threats and fortify cybersecurity across the decentralized web without incurring excessive costs.
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