Audited, Yet Hacked: The Crucial Role of Real-Time Monitoring in Web3 Security
In the rapidly evolving world of Web3, ensuring security is a top priority for crypto companies. Many of these companies heavily rely on pre-deployment smart contract audits, believing that these audits will effectively protect their projects and client funds from hacking attempts. However, recent data paints a different picture, revealing that 90% of the hacked smart contracts had already undergone pre-deployment audits. This statistic highlights a critical gap in the current approach to Web3 security.
The Role of Smart Contract Audits
Undoubtedly, smart contract audits play a crucial role in the security architecture of any crypto project. These audits help identify common vulnerabilities and security-related bugs before the contract is deployed. Conducting multiple audits by different firms is a common practice, aimed at ensuring that any potential issues are discovered and addressed.
However, while audits do reduce the number of attack points and the probability of a hack, they alone cannot guarantee a foolproof system. Audits can only detect known vulnerabilities and cannot account for new, sophisticated attack vectors that may emerge post-deployment. Therefore, relying solely on audits does not encompass all the necessary steps to secure the system.
Case Studies: Audited, Then Hacked
Unfortunately, there are numerous examples of projects that were hacked despite having their smart contracts audited, sometimes multiple times and by different auditing providers. These cases clearly illustrate the discrepancy between expectations and actual results.
For instance, Dough Finance had their contracts audited and even labeled as “low risk” by an auditing company, yet they were still hacked, resulting in a $1.8 million loss. Similarly, UwU Lend and Radiant Capital both experienced hacks despite their contracts undergoing audits. Euler Finance, which had its contracts audited by four leading auditing companies, also fell victim to an exploit, resulting in a $197 million loss. Even DeFi protocol LI.FI, audited by two providers, was exploited and lost around $11 million.
The Missing Element: Real-Time Monitoring and Pre-Transaction Screening
Many companies overlook the importance of real-time monitoring and pre-transaction screening as essential components of a comprehensive security strategy.
Real-Time Monitoring provides continuous oversight of deployed smart contracts, promptly detecting and responding to security issues, scams, fraud, and other malicious incidents as they occur. This proactive approach significantly reduces the window of opportunity for hackers and allows for immediate action to mitigate potential damage.
Pre-Transaction Screening assesses the risk of transactions before they are executed, blocking malicious actors and preventing fraudulent activities. By integrating this screening process, companies can ensure that only legitimate transactions are processed, further enhancing their security posture.
The Necessity of Crisis Management Mechanisms
In addition to real-time monitoring and pre-transaction screening, implementing crisis management mechanisms such as pause functions and circuit breakers is crucial. These mechanisms can be automated or manual and are vital for responding in real-time to alerts from monitoring and detection systems.
Conclusion
While smart contract audits are an integral part of Web3 security, they are not sufficient on their own. To truly secure crypto projects, companies must adopt a holistic approach that includes real-time monitoring, pre-transaction screening, and robust crisis management mechanisms. By integrating these advanced security measures, crypto companies can significantly enhance their security posture, effectively protecting their projects and client funds from the ever-evolving threats in the Web3 space.
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