Web3, which is considered the third generation of the internet, is an exciting development that promises a decentralized, trustless ecosystem where users can transact without intermediaries. However, like any new technology, it comes with its own set of challenges, particularly in terms of security. Unsafe transactions are a significant issue on Web3, and several possible solutions are being implemented to resolve it. Let’s take a look at some of those possible solutions.
Reasons Why Transactions Are Unsafe In Web3
One of the main reasons why transactions on Web3 can be unsafe is because they are irreversible. Unlike traditional banking transactions, where banks have some controls over fund movement, they can reverse a transaction in case of fraud or error but once a transaction is confirmed on the blockchain, it then becomes permanent and cannot be changed. This means that if a user sends funds to the wrong address, or falls victim to a scam, they may have no way of getting their money back.
Secondly, Another reason why transactions on Web3 can be unsafe is because of the prevalence of scams and phishing attacks. These attacks are particularly common in the decentralized finance (DeFi) space (as we saw many of these projects affected throughout last year), where users can lend, borrow, and trade cryptocurrencies without intermediaries. Scammers often create fake websites or apps that mimic legitimate DeFi protocols, thereby, tricking users into providing their private keys or sending funds to a fraudulent address.
Potential Solutions To Help These Problems
To address these issues, several possible solutions are being put in place. One of the most promising is the use of smart contracts. Smart contracts are described to be self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. When certain conditions are met, the contract executes automatically, without the need for intermediaries. This means that users can transact with each other without the risk of fraud or error, as the terms of the contract are enforced by the blockchain.
Secondly, another solution being put in place to address unsafe transactions on Web3 is the use of decentralized identity (DID) systems. DID systems are programmed to allow users to prove their identity without needing a centralized authority. This means that users can transact with each other without the risk of identity theft or fraud, as the blockchain verifies their identity. DID systems are particularly useful in the DeFi space, where users must prove their identity to access certain protocols or services.
Furthermore, another solution being put in place to address unsafe transactions on Web3 is the use of decentralized exchanges (DEXs). Basically, DEXs are exchanges that allow users to trade cryptocurrencies without the need for intermediaries. Unlike centralized exchanges, which hackers often target, DEXs are decentralized and operate on a peer-to-peer basis. This means that users can transact with each other without the risk of fraud or hacking, although some of these DEXs are now becoming the target of these notorious hackers.
Finally, another solution being put in place to address unsafe transactions on Web3 is the use of blockchain analytics. Blockchain analytics allow users to track the movement of funds on the blockchain, enabling them to detect and prevent fraudulent transactions. This is commonly used in the DeFi space, where users need to be able to detect and prevent fraud in real time. A close example of this is in the event, whereby validators were able to prevent a potential $570 million exploit on BNB Chain sometime late last year.
Conclusion
To Summarise, despite how unsafe transactions are a significant issue on Web3, several possible solutions are being put in place to resolve it. These solutions include the use of smart contracts, decentralized identity systems, decentralized exchanges, and blockchain analytics. While these solutions are still in their early stages, they hold great promise in making Web3 a safer and more secure ecosystem for all users. As the Web3 ecosystem continues to evolve, it will be essential to prioritize security and address these issues to ensure that users can transact safely and securely.
Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any projects.
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