Fundamentals of DApp Security: Protecting Yourself in a Decentralized Environment
Decentralized applications have developed as an answer to the rapidly changing world’s technologies. By their means, the transparency and security of all blockchain-related operations is now a reality. And though such applications are already time-tested, it’s their security that people are still asking about.
In this module, we will delve into the fundamentals of DApp security and see how we can ensure a high level of protection.
Top 3 DApp-related Risks
1. Poor Design
The hierarchy is the following: code - smart contracts - DApps. However, this hierarchy is frequently spoiled by bugs, which are often treated as weaknesses. They are typically found by hackers who are interested in accessing your funds and stealing them for good.
2. Harmful DApps
These are the applications whose entire code or parts have been compromised. And it’s typically done in a way that allows either makers or third parties to take the assets.
3. Phishing DApps
Imagine you’ve been partnering with a certain company for a while, and you know their development team is really trustworthy and solid. When googling the company’s website, you press on the link that redirects you to the site that is similar but with one extra letter. As the website looks identical to the one you’ve already been using for quite a while, you don’t notice any difference. However, once your wallet is connected, your assets are stolen by creators.
What Protective Measures Should One Practice?
Q: Are your smart contracts secure?
The majority of risks and vulnerabilities are reduced through the protection of those contracts. It is advisable to go with diverse testing options and code auditing instruments that:
identify the majority of bugs;
showcase most vulnerabilities of a contract.
Above that, it’s good to have instructions for error handling, input validation, and access control.
One of the most essential steps is to make sure you perform regular audits to identify the most vulnerable points. Minor or major, all audits are helpful in discovering the contract’s flaws.
Q: Is the consensus algorithm secure enough?
There are three different types of algorithms suitable for a distributed application: PoW, DRoS, and PoS. Investigate each one before you choose a match for your application. Characteristics like security, Sybil attack resistance, as well as decentralization are the top three to consider while studying and choosing.
Q: Are your mechanisms of authentication & authorization secure?
Make sure you generate the top mechanisms to safeguard not only passwords but also private keys and user accounts. In the process, apply two-/multi-factor authentication, physical computing devices safeguarding digital keys and performing encryption, and temporary algorithm-generated passcodes that utilize the current time as an authentication factor.
Q: Have you implemented multiple privacy-enhancing features?
Among the core ones are confidential transactions, zero-knowledge protocol or Complete Zero Trust network security, and private channels. Any encryption methods are able to secure records at rest and those in transit.
Q: Do you actually perform penetration testing?
It’s a must-do for DApp’s security. What this testing type offers is a solid simulation of an attack during which it’s always possible to make a list of the process flaws in the crypto exchange procedure, the wallets, and finally, the applications themselves. Penetration testing finds new attack ways as well.
Q: Are you working against phishing scams?
Anyone can be misled into showcasing personal information. Not to become a victim:
do not disclose your recovery phase word;
always verify the legitimacy of the website you are planning to use;
keep it slow, looking for errors of grammar and spelling - this is where scammers fail.
How to Implement Security Measures in Practice
Here are ways you can copy and apply depending on the DApps type you work with.
Non-custodial wallets
Security tip number one is to ensure the safety of the seed stored in the wallet and the private key since this wallet type directly accesses the private key as well as ensures the key’s security.
Analyze every key-related interaction, and make sure the logic behind was implemented in a proper way. Do not give debugging instruments any access to your wallet.
Cross-chain bridges
These bridges have two basic responsibilities: they verify events taking place and transmit data to a blockchain. These features themselves are helpful in ensuring safety. Nevertheless, private key safety must be a concern as well: The system often asks for signatures to see a transfer as legitimate. Thus, it’ll be essential for every validator to utilize a different node.
Explorers
They are often utilized by those checking the transfer status. The explorers on blockchain deliver important insights, ensuring a high user experience level. The integrity of the delivered information is a top security concern in this case.
The explorers have to collect data from different nodes and compare it, thus reducing any risks. The records are said to be manipulation-resistant. However, it is a proven fact that the majority of explorers available do not want to take any responsibility for providing inaccurate records.
Less urgent security issues are the user's liability. Reliable websites are supposed to restrain the amount of information they gather: personal details, geolocation, and IP address. Make sure you read the information about data security that such websites provide before you connect any wallet or input any personal information.
Closing Thoughts
It’s crucial to start with determining your goals and then trying to outline the technical scope of work. Break down the application into pieces and investigate possible menaces. With this done, proceed with studying the fragility and analyze all of the attacks. Complete the seven-step process by inspecting all of the impacts and risks, and the flow of protecting yourself in a decentralized environment is completed. Thus, not only your funds but also your personal data is safeguarded from stealing and illegal use.