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The advent of Ethereum in 2015 revolutionized blockchain technology forever by enabling the creation of smart contracts and decentralized applications (DApps).
Since then numerous other blockchains supporting smart contracts and DApps have emerged. This also came along with security challenges and vulnerabilities, identifying and addressing vulnerabilities facing smart contracts and web3 protocol is crucial because crypto hacks are costing projects millions in user funds.
Enters Web3 Bug Bounties – a proactive and innovative approach to fortifying decentralized projects and the web3 ecosystem.
Bug bounties in web3 are open-source public reward programs that are offered by web3 projects to ethical hackers, developers or researchers to identify and disclose flaws, vulnerabilities and loopholes in the project's systems or smart contracts, usually after the project has had an audit and gone live.
With the increasing complexity and scope of crypto exploits, having a well-organized bug bounty program project can leverage the expertise of diverse security professionals who can thoroughly assess the project from different angles, further fortifying its security measures.
In the crypto space minor software errors can lead to catastrophic losses therefore securing smart contracts and DApps from risks and vulnerabilities is a must.
How Web3 Bug Bounties Work
Web3 bug bounty programs typically involve three steps: security assessment, reporting and reward distribution.
This is the process in which ethical hackers and developers scrutinize and evaluate the codes and infrastructure of a protocol or software with the aim of finding loopholes and vulnerabilities
After thoroughly assessing the project, if the developer or ethical hacker spots a flaw that can be exploited, they submit a report describing the vulnerability and exploit possibilities to the organization.
The organization then confirms that the bug exists and assesses its severity. Some bug bounty programs may offer to retest, allowing companies to invite hackers to test the code after patching the vulnerability. Bug bounty programs can operate on a one-time basis or run continuously, depending on the organization’s needs.
The ethical hacker or developer is rewarded after the project confirms the vulnerability in their report; this reward is known as a ‘bounty’.
The goal is to incentivize ethical hackers known as whitehats to discover flaws in a protocol before malicious hackers (blackhats) beat them to it and exploit the project.
Web3 project can launch various types of bug bounty programs depending of their goal some of the most common type of bug bounty programs in web3 are:
Blockchain is still evolving - the technology is still in its infancy and as it evolves security standards specifically designed for blockchain are equally developing.
At a stage like this where even Solidity the de da facto programming language for Ethereum the chain that brought about smart contracts and DApps is not up to 10 years old Web3 security standards are still maturing as a result previously undiscovered vulnerabilities may continue to surface in contracts.
Therefore no matter the amount of extensive auditing and code review before launching a Web3 project cannot rule out the possibility of bugs appearing in a smart contract once it’s live.
Open-source nature of smart contracts - web3 thrives on open source ideals and as a result the codes of protocols and projects are publicly available for any and everyone including malicious actors constantly seeking for vulnerabilities to exploit. This means that vulnerabilities are publicly visible, potentially increasing the possibility of a hack.
Cost Effective - Bug bounties are a cost effective way for projects to boost their level of security, Web3 firms can decide how much to pay for specific classes of vulnerabilities moreover smart contract bug bounty programs pay out only if the hacker discloses a vulnerability, which the project can verify internally.
Bug bounty programs also have the potential to provide continuous testing and vulnerability monitoring as they can run all year round.
Leveraging on security experts- through bug bounties projects are assessed by a community of diverse security professionals including ethical hackers and independent security researchers with different backgrounds, experiences, and skill sets. These individuals can thoroughly assess the project from different angles, scrutinizing every line of code and racing to identify vulnerabilities.
Web3 bug bounty is crucial for identifying diverse issues in blockchain systems. Some common includes wallet,token,user interface vulnerabilities, and interoperability issues. These may lead to unauthorized access, token duplication, UI injection attacks, and challenges in integrating blockchain networks, respectively.
A more robust security framework in Web3 will not only protect users' assets but also increase confidence in the Web3 space which will be a significant step forward in making Web3 mainstream.
However, bug bounty programs are just one of the many ways Web3 projects can enhance their security and should only complement existing security practices. Another crucial method of improving the security of smart contracts and crypto systems is through auditing.
So go ahead and request an audit from Hashlock, Australia's leading blockchain security and smart contract auditing firm.
[Author’s Note: This article does not represent financial advice, everything written here is strictly for educational and informational purposes. Please do your own research before investing.]
Author: Godwin Okhaifo
