Crypto Security Basics: Staying Safe in Web3

Since 2014, when Ethereum’s co-founder Gavin Wood coined the term 'web3,' the word and the concept of decentralization, which is its core promise, have gained unprecedented popularity. This surge is attributed to the benefits web3 offers users and the challenges associated with centralization. Despite the empowerment that web3 brings, it is not without risks. These risks materialize in the form of hacks, breaches, phishing scams, and similar threats, leading to the unfortunate loss of funds for unsuspecting users.

No industry is immune to risks; while the type and methods may vary, risks are inherent across all sectors. Understanding these risks and adopting strategies to mitigate them is essential. This article provides insights into the steps to safeguard yourself in web3.

What Does it Mean to Stay Safe in Web3?

To understand what it means to stay safe in Web3, it's important to grasp the concept of Web3 itself. Web3 is the updated version of the web. Like every upgrade, Web3 comes with unique features that empower users and distribute ownership. Web3 represents the third iteration of the web, built on decentralized technologies like Blockchain, allowing for collective ownership rather than central control.

Security isn't exclusive to Web3; in Web2, users are also advised to practice cyber-safe methods, such as avoiding suspicious links and being cautious about the platforms where they share sensitive data. These measures aim to protect users from fraudsters.

The same principles apply to the Web3 space. Crypto security involves the measures crypto users are advised to implement to safeguard and preserve their digital assets.

Search engines and social forums are replete with stories of crypto hacks, breaches, and phishing scams that ultimately devastate their victims. This is because huge amounts of financial losses are incurred in those cases. This makes learning what you can do as an individual to keep your funds safe immensely important.

Why is Crypto Security Important?

There are several reasons why Web3 users need to prioritize their safety when interacting in the space, especially to avoid issues such as data breaches or bankruptcy. We’ll discuss more about that in this section.

Lack of Regulation: In an industry with no recognized regulatory purview ensuring parties involved act accordingly, you're tasked with the responsibility of ensuring that things are in check. Understanding how to limit the chances of being affected by hacks and the various risks involved in the crypto ecosystem is crucial.

Self-Custody: One of the most unique benefits of Web3 and a point of attraction is decentralization. This means Web3 users are in charge of everything, including their data. With this level of autonomy, users have control over protecting their assets, their interactions across dApps, and other potential threats like malicious intent or circumstances such as bankruptcy.

To Safeguard Against Loss: In the first quarter of 2023, $656 million was lost to crypto hacks, scams, and rug pulls, of which $108 million was lost to phishing scams. To protect yourself from losses, particularly those from phishing scams, which are increasingly common due to artificial intelligence (AI) and other technologies, it's crucial to acquire the right knowledge about the cryptocurrency and Web3 world.

The Growing Nature of The Web3 Space: Currently, the Web3 ecosystem is valued at $27.5 billion, and the industry continues to expand with several platforms emerging. To stay ahead of this fast-paced development and capitalize on it, it's important to learn about Web3 and its various components to both benefit from and safeguard yourself in this evolving landscape.

How to Stay Safe in Web3

Using a Secure Wallet: The first step to staying safe in Web3 is by using a secure wallet. Usually, hardware wallets are recommended because they are less vulnerable to attacks. Software wallets are cheap, convenient, free to download, and use, but highly susceptible to cyberattacks. Each type of wallet has its pros and cons; the responsibility lies with you to choose the one that is safest for your funds.

Restricting Access to Your Wallet: One of the key elements of interacting with the cryptocurrency ecosystem, especially in the area of decentralized finance (DeFi), is connecting your wallet to decentralized applications (dApps). This can leave you exposed to potential hacks, with those protocols having access to your private keys. Ensure you disconnect this protocol after the transaction occurs as a safety precaution. Other approaches include setting up two-factor authentication (2FA), whitelisting addresses to approve transactions, and establishing a strong password for your wallet.

Keeping Your Wallet Safe: Another way to stay safe in Web3 is to ensure you follow the safety precautions associated with each of the wallet types you use. For example, when using a paper wallet, consider all factors that can lead to losing access to it. Preventive measures include avoiding physical tampering and refraining from creating digital scans of the paper wallet. This is a safe way to approach it. Other wallet types have peculiar instructions for keeping them safe.

Ensure the Web3 Platform is Audited: Before using any Web3 protocol or dApp, it's important to prioritize your safety by ensuring that these platforms have undergone security checks for potential vulnerabilities that hackers might exploit. If the platform is audited, it is a safe practice to use it. For example, ReHold, a DeFi earning platform that allows users to earn up to 220% APR on several tokens, is audited by two of the most recognized blockchain audit firms, PerkShield and Certik. This ranking places ReHold V2 among the safest DeFi earning applications to use.

Using DEX Instead of a CEX: Another method of staying safe is considering using a decentralized exchange (DEX) rather than a centralized exchange (CEX). The primary reason for this is the autonomy of decentralized exchanges, where you have control over your private keys, unlike centralized exchanges where your private key is managed by the platform. This will help you avoid issues of losing complete access to your crypto assets if anything goes wrong with the CEX in question. A prime example is the FTX bankruptcy, where users lost access to their assets stored on the exchange.

Avoiding Public WiFi Networks: Connecting to public WiFi for an internet connection has been a known way for hackers to gain access to people's private details. For crypto users, it's important to be mindful or completely avoid public WiFi; it can put them in jeopardy. Hackers can use it to access details such as their wallet seed phrase and other private data that can be exploited.

Be Conscious of Phishing Links: Phishing links are created with malicious intent to obtain sensitive data, such as seed phrases, from users when clicked. The crypto ecosystem is replete with phishing scams, which manifest in forms such as emails, fake NFT minting, and the like. You must cross-check and conduct research before clicking on any link. Sometimes, they even attempt to impersonate familiar brands to convince you to click the links. One way to identify these types of links is to pay close attention to every detail.

Using Multiple Wallets to Store Your Assets: Storing or keeping your digital assets in more than one wallet can be overwhelming, but it is extremely beneficial in the long run. Using multiple wallets is a way to distribute your crypto assets across several wallets for safety; each wallet has its specific use. This helps minimize the risk of issues such as smart contract breaches, bankruptcy, and even hacks.

Conclusion

The importance of crypto security cannot be overstated. With numerous risks ranging from hacks and breaches to phishing scams that can lead to irreversible financial losses, individuals must take responsibility to stay safe in the space and secure their assets.

Staying safe in Web3 is not a one-off thing; it is a continuous process that requires constant learning and a commitment to implementing the best practices. As the space continues to grow and technology evolves, becoming a lifelong learner and a lifelong guardian of your assets is advised.