Web 3.0 Security Issues: What Your Company Needs to Know for 2023

Originally published by TokenEx.

Written by Anni Burchfiel, TokenEx.

The world wide web had its first major shift when blogging and forum capabilities were added to web alongside the established collection of static company websites. The ability for anyone to add their own content to the web, though common to us now, was a the begining of Web 2.0. With the emergence of blockchain technologies, and a general distrust of tech giants like social media platforms, many are imagining the possibilities of a decentralized world wide web: Web 3.0.

Decentralization has become the buzzword for Web 3.0, with users excited to escape privacy concerns and take control of their online experience. However, many of these rapidly growing technologies, like cryptocurrency, suffer from a lack of oversight and regulation. In this blog, we’ll cover some of the top security issues facing Web 3.0 technologies and provide guidance on how to avoid cybercrime in an increasingly difficult to police corner of the web.

A Quick Web 3.0 Definition

Web 3.0 is a decentralized internet experience built on blockchain technology. This technology was created to, hopefully, give users greater control over their data and creations. Web 3.0 also focuses on emerging technologies, like AI, semantic search, and virtual reality.

While Web 3.0’s intention is to give the power of the internet back to users, it also comes with a steep learning curve and numerous security issues. Web 3.0 technologies are inherently built on decentralization, and we’re already seeing how this shift towards reduced oversight is allowing bad actors to take advantage of the confusion about these quickly evolving technologies.

What are the Top Web 3.0 Security Issues?

Understanding the top security concerns that decentralization and anonymity create will help you prepare for Web 3.0 and stay safe on the evolving internet. So, what are the main security issues of Web 3.0?

Cryptocurrency Crime

With the lack of oversight and regulation, cryptocurrency crime thrives on Web 3.0. Here are three examples of how scammers have evolved their approach to integrate with Web 3.0:

• Ice Phishing – Cyber attackers trick victims into signing transactions that then transfer their cryptocurrency to the attacker.
• Crypto Rug Pulls – Influential people, like content creators or minor celebrities, will create a new cryptocurrency and then pull funds at the peak of the hype instead of continuing support and marketing for the cryptocurrency. These schemes fall in a legal gray area, so while many investors lose money, the scammers often walk away with the money easily.
• Crypto Jacking – Hackers will hijack a victim’s computer to install software that will comandeer the device for crypto mining.

Manipulated AIs

While Artificial Intelligence is an incredible tool, it can also be manipulated by bad actors. When AIs pull information from the internet, and the resources on the internet are not held to any sort of oversight, that AI can be manipulated.

AI manipulation could result in widespread misinformation. For example, a government, group, or corporation could flood the internet with propaganda, which AIs would pull from unknowingly in order to serve information. In a similar way, AIs could be fed malicious code or ransomware and infect unknowing users or applications.

Quality of Information

The ability to trust information on Web 3.0 is undermined by the lack of oversight and regulation for published content, which can lead to the spread of intentional misinformation. Relying on known and established sources for information has been a essential to obtaining reliable information since the beginning of human communication. While misinformation has been a concern throughout the history of the internet, this issue is worsened with Web 3.0’s emphasis on decentralization and anonymity. The lack of censorship with Web 3.0 increases the severity of already rampant issues like misinformation, hate speech, and scams.

Accountability

The anonymity of Web 3.0 makes many regulations, and particularly the enforcement of those regulations, more complicated. While Web 3.0 may help many users with privacy concerns, anonymity helps criminals escape the consequences of their actions. Consumers participating in Web 3.0 could be scammed or stolen from, while the anonymity of the perpetrator allows them to escape.

Advanced Social Engineering

The anonymity of Web 3.0 also creates an opportunity for social engineers to impersonate trusted individuals, corporations, even the government. While the blockchain is a tamperproof tool, hackers know how to attack the security’s weakest link: human error. Individuals confident in the safety of their assets on the blockchain may let their guard down and unwittingly compromise their data when exposed to a social engineering attack.

Additionally, ENS (Ethereum Name Service) domains, which are growing in popularity, can be claimed and sold by third parties. Claiming the name of a legitimate organization with an ENS gives hackers fake social proof. For those who don’t understand how the ENS works, social engineers can use an ENS to trick individuals into thinking that they are communicating with a trusted individual or corporation.

Smart Contract Hacks

Smart contracts can be compromised by criminals and interfere with a number of important Web 3.0 functions, especially blockchain transactions and crypto wallet functionality. Hackers can either exploit bugs in smart contracts or disguise malware as smart contract code. Smart contracts also lack significant legal protection as regulations are still limited when it comes to smart contracts.

How to Stay Safe on Web 3.0

Web 3.0 is experimenting with quickly evolving technologies and concepts, which creates a steep learning curve for those entering the world. Individuals who interact with technology they don’t fundamentally understand are more likely to make mistakes that leave them vulnerable to scammers. This is why personal and professional education about the dangers of Web 3.0 is essential before exploring the exciting possibilities.

One of the best defenses for companies and individuals looking to explore, or invest, in Web 3.0 is to create a Zero Trust Policy when it comes to data security.