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Security is one of the most important topics in Decentralized Finance.

Without the security, your fund is for others to grab 💸.

🔒 Crypto Security

Crypto itself is a component derivative from cryptography - a technique to secure communication in the presence of malicious third parties. It is prone to attacks from multiple aspects. Cryptocurrency Security Standard (CCSS) was introduced in 2014 to provide an open standard for protecting crypto operations that are separated with three levels of a security audit.

Level I is the most stringent security protection and Level III is the least stringent security protection.

The audit components include:

Image credit: https://www2.deloitte.com/mt/en/pages/technology/articles/mt-article-cryptocurrency-security-standard-CCSS.html

• Key/seed generation
• Wallet creation
• Key storage
• Key usage
• Key compromise policy
• Keyholder grant/revoke policies & procedures
• Third-party security audits/pentests
• Data sanitization policy
• Proof of reserve
• Audit logs

Even if you passed a level III audit does not guarantee your crypto to be safe. 

👮 Defi Security

The core component of Defi is smart contracts. Only the problem with the smart contract is that it defeats the original design intent of cryptocurrency. Despite the benefit of the smart contract to bring more functionality to crypto, its capabilities as immutability have been significantly reduced. 

A smart contract is a program to command how the blockchain behaves. It sets predetermined conditions for the program to be met to execute operations. The problem is that it opens the possibility for programmers to manipulate codes to reach their own goals.

Of course, we do not undermine benefits from smart contracts, we also need to be aware that such loopholes will exist for hackers to exploit.

Image credit: https://media.consensys.net/thoughts-on-defi-security-640dde37bb3b

In contrast to cryptography, that information will be hidden, some of the information will be exposed in smart contracts for hackers to manipulate. Also, hackers can gain access through predetermined privileges and the gain power to manipulate codes. That will diminish decentralization and increase centralization risks.

🈲 How to Prevent Hacking 

One way is to conduct a smart contract audit. It is a crucial step for the Defi project to conduct an audit. Although an audit can not completely eliminate the possibility of hacking, it can uncover flaws to improve the chances to prevent hacking.

Another way is to create a Cefi like Defi. Implementing a central-like command can prevent hacking from executing through smart contracts and attack funds automatically without possible verification.

The third way is to go through a hackathon - a collective event that brings talents to work and helps increase system security. Similarly, submitting a bounty to reward Whitehats is another way to discover the vulnerability of the code.

🎍 Security at Yearn

Whitehat has submitted a report to prevent a possible exploit that can lead to a significant loss of user funds. Yearn was able to fix the vulnerability and report it to the public. 

In Conclusion

Security is important in crypto and Defi. Continue improving security is a key to preventing hacking in the future. 

Photo by Mario Purisic on Unsplash

Note: the post was shared on multiple platforms here.

You can refer my previous article lists here and here
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2022 Prediction
2022 Prediction #1: L1 Scalability
2022 Prediction #2: L2 Bridges
2022 Prediction #3: Zero-Knowledge Proofs or ZKPs
2022 Prediction #4: Regulated Defi On-Chain KYC
2022 Prediction #5: Institutional Crypto Adoption
2022 Prediction #6: Defi Insurance
2022 Prediction #7: NFTs-Based Communities - DAO 1.5
2022 Prediction #8: Metaverse and NFTs
2022 Prediction #9: Web2 Companies’ FOMO
2022 Prediction #10: Time for DAO 2.0
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DAO The Way
DAO The Way Part 1
DAO The Way Part 2
DAO The Way Part 3
DAO The Way Part 4
DAO The Way Part 5
DAO The Way Part 6
DAO The Way Part 7
DAO The Way Part 8
DAO The Way Part 9
DAO The Way Part 10
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DAO The Way Part 12
DAO The Way Part 13
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Learn How To Defi
Learn How To Defi Part 1
Learn How To Defi Part 2
Learn How To Defi Part 3
Learn How To Defi Part 4
Learn How To Defi Part 5
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Crypto Comics
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Crypto Comics - What is DeFi-2
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Crypto Comics - What is ApeCoin
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Crypto Comics - What is Tokenomics
Crypto Comics - What is APR
Crypto Comics - What is to The Moon
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Learn Web3 in 100 Days
Learn Web3 in 100 Days - #1 What is the Internet and How Relevant to Web3
Learn Web3 in 100 Days - Day 2: What are the Browsers and Servers
Learn Web3 in 100 Days - Day 3: What are HTTP Status Code
Learn Web3 in 100 Days - Day 4: HTML and CSS and JS
Learn Web3 in 100 Days - Day 5: What is programming
Learn Web3 in 100 Days - Day 6: Markup, Elements, Tags, and Hyperlinks
Learn Web3 in 100 Days - Day 7: Style Your Web
Learn Web3 in 100 Days - Day 8: JS
Learn Web3 in 100 Days - Day 9: SQL
Learn Web3 in 100 Days - Day 10: Front-End
Learn Web3 in 100 Days - Day 11: Front-End Framework
Learn Web3 in 100 Days - Day 12: More HTML
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Modern Economic Nonsense
Modern Economic Nonsense - Inflation and Incentives
Modern Economical Nonsense - The Astrologist's Way
Modern Economical Nonsense - The VUCA World
Modern Economical Nonsense - Zug Tax and How to Run your Own Monopoly
Modern Economical Nonsense - Participatory Economy
Modern Economical Nonsense - Economic Models
Modern Economical Nonsense - Tokenomic Models
Modern Economical Nonsense - Design A Reputation-Based System
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Yearn Finance Comic
Yearn Finance Comic - Part 1
Yearn Finance Comic - Part 2
Yearn Finance Comic - Part 3
Yearn Finance Comic - Part 4
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Curated Lists
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Curated Lists - Crypto-enabled Communities

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Disclosure: The article was written by a delusional author who is possibly a nut job without any questions whatsoever about expertise in the subject matters. You should not believe any words this author wrote or you may experience similar symptoms or even possibly become a nut job.