But can one wallet do it all? Or do we need more? How many types of wallets exist? Let’s take a look at them and see their features.

Well, Web3 wallets can be classified into many types.

• Based on ownership, we have custodial and non-custodial wallets.
• Depending on where the wallet is present, we have hot and cold wallets.
• Based on utility, we have smart contract wallets and NFT wallets.

What are Custodial and Non-Custodial Wallets?

Custodial wallets are those that are not in the custody of the user. Seed phrases and private keys help secure the wallet. Many wallet service providers, like Metamask, Coin Base Wallet, etc., provide users with wallet services from their platforms or through applications.

A non-custodial wallet is where the user must take care of their own wallet. The user is provided with a public key, a private key, and a recovery or seed phrase. Some examples of non-custodial wallets are Trezor, Ledger, and Electrum.

Consequently, with the freedom to store your own private and public keys – custodial wallets are considered by many to be secure against hacks and threats.

Why Is A Wallet “Hot” or “Cold”?

A wallet is said to be “cold” when offline from the internet. A wallet connected to the internet or that works when connected to the internet is known as a “hot wallet.”

Cold wallets comprise paper wallets and tangible wallets. Paper wallets, as the name suggests, don’t mean that the wallet is on a piece of paper or that it is a fake wallet address. This time, the wallet is a scannable code to carry out transactions.

Further, tangible wallets, as the name suggests, are a real deal. You can carry it around in the form of a portable USB. And that contains your Web3 data, art, and assets.

Hot wallets, on the other hand, are intangible digital wallets. They are either present as a desktop app, a browser extension, or a mobile application. Consequently, all hot wallets are connected to the internet.

An added advantage of a hot wallet is that users can operate their wallets from a mobile phone or a personal computer.

Read More: The Best Web3 Wallets For 2023!

Are There Wallets Specific to NFTs?

You store your crypto coins in a Web3 wallet; Well, then how does one store non-fungible tokens? Well, you preserve them in Web3 wallets.

Can all wallets support NFTs? Answer: No. Are there wallets specific to NFTs? YES!

NFT wallets behave to provide a digital storage address for art and assets. However, as mentioned above, not all Web3 wallets support NFTs. Some handle cryptocurrencies, while some handle both cryptocurrencies and NFTs.

Digital wallets need to be compatible to store tokens on a particular blockchain. So the wallets can be synergic with the blockchain where the NFT is built.

What are some famous NFT wallets in 2023?

Some famous NFTs wallets are:

1. MetaMask
2. Trust Wallet
3. Coinbase Wallet
4. Exodus
5. Argent

What Are Smart Contract Wallets?

Imagine that your Web3 wallets have smart contract functionality. What would it mean for the wallet or for the user? It would mean security, safety, and power for your wallet to sign transactions with validators instead of private and public keys.

Simply put, smart contracts work with your wallet to let transactions happen. The autonomous code is responsible for wallet transactions. Whether it is to send an amount to a beneficiary or to receive a token, the code, upon pre-defined conditions, executes the function promptly.

Further, a smart contract wallet can take care of transactions and security. The wallets’ support for smart contracts includes attributes like account freezing, social recovery, and transfer limits. So, they are of great use and protective!

Smart contracts pave the way for a novel mode of wallet utilization. They are virtuous in many ways, some of which are:

• Autonomous execution of transactions
• Mediator-less transactions
• Executes function without fault
• Secures the payment with a smart contract account, i.e., the smart contract creates a paper account and carries the transaction. Autonomously carrying out a transaction means one is assured that the transaction was carried out safely.
• Transfer limits
• Account freezing/ account recovery
• Account abstraction

So, these are some of the various wallet types present in Web3. You can use a wallet to store NFTs, and cryptocurrencies, execute transactions via a smart contract and even carry it around as a USB.

Summary

Web3 Wallets are essential to store your cryptocurrencies and NFTs. More than that, they also act as a passcode to the Web3 universe. 

Users log in and interact with DApps with the help of Web3 Wallets. Assets and Art alike are accessible from one wallet address the user has. 

The wallets, however, are of many types… Users without custody of their own wallets have Custodial Wallets. It’s in control by a third party. Whereas, those who take care of their wallet have Non-custodial wallets.

A wallet is “Hot” when it is connected to the internet. Hot wallets are present as Web extensions, Mobile applications, and Web applications. A ‘Cold’ wallet is offline. It’s not connected to the internet in its tangible hardware form or in its QR code form.

Although wallets may store data and assets; not all wallets store NTFs. Thus the need for NFT wallets. These are special wallets that can store the digital art in whatsoever form present while being compatible with the blockchain where the NFT is held.

Lastly, we have smart contract wallets. Wallets with smart contract functionality. Permitting for autonomous execution of transactions, providing safety and securing the data.

The post Types of Web3 Wallets appeared first on InnovaRise.

Further, frameworks are designed to simplify the development process by providing a set of standardized building blocks that can be reused across multiple applications. They can create various software applications, from web apps to desktop and mobile applications.

Some popular frameworks in computer science include Django, Angular, and Ruby on Rails for web development. Each framework has its features and strengths, and developers can choose the one that best fits their needs and programming skills.

What Is A Web3 Framework?

Web3 framework is a collection of pre-written code and libraries. These enable developers to build decentralized applications (dApps) using blockchain technology. Therefore, frameworks provide a standard way of building applications for Web3, using the principles of blockchain technology.

Moreover, Web3 frameworks are built on top of the Ethereum blockchain. Ethereum is a Web3 platform that allows developers to code and execute smart contracts. Smart contracts are autonomous, self-executing codes with the agreement terms predefined between buyer and seller.

Further, some popular Web3 frameworks include Truffle, Embark, and Brownie. These frameworks provide tools and libraries that simplify the development of dApps, such as contract management, deployment, testing, and debugging. They also support the interaction with the Ethereum blockchain and other blockchain networks and integration with other web technologies.

Web3 frameworks are becoming increasingly popular as blockchain technology gains more mainstream adoption. Web3 frameworks enable developers to build decentralized applications that can provide a lot of benefits. Some of these merits are greater transparency, security, and trust. Moreover, they have the potential to revolutionize various industries, such as finance, healthcare, and supply chain management.

Need for Web3 Frameworks

There are several reasons why developers use Web3 frameworks to build decentralized applications (dApps) on blockchain networks:

1. Simplifying development: Web3 frameworks provide pre-written code and libraries that help developers to build dApps more efficiently by abstracting away low-level details and providing higher-level abstractions. This simplifies the development process and enables developers to focus on building the core features of their dApp.

2. Ensuring security: Web3 frameworks often provide security features, like secure coding practices, contract testing tools, and vulnerability scanning. These features can help to identify and mitigate potential security risks in the dApp, ensuring that it is secure and reliable.

3. Interoperability: Web3 frameworks provide means to enable coders to interact with different blockchain networks, and integrate them with other web technologies. This interoperability can help to create a more connected and decentralized web ecosystem.

4. Community support: Web3 frameworks are often backed by a vibrant developer community that provides support, resources, and feedback. This community can help to improve the quality of the dApp and provide valuable insights into best practices and emerging trends.

5. Standardization: Web3 frameworks provide a standardized way of building and organizing dApps on blockchain networks. This standardization can help to create more reliable and predictable dApps that are easier to maintain and upgrade over time.

Overall, Web3 frameworks provide a streamlined and secure way of building dApps on blockchain networks. Thus making it easier for developers to enter the rapidly growing world of decentralized applications.

Types of Web3 Frameworks

There are several types of frameworks in Web3, each with its own features and capabilities. Here are some of the most common types of frameworks in Web3:

1. Smart Contract Frameworks: These frameworks help developers write, deploy, and manage smart contracts on blockchain networks, such as Ethereum. Examples of smart contract frameworks include Truffle, Embark, and Brownie.

2. Blockchain Development Frameworks: These frameworks guide developers to create full-stack blockchain applications, including the front-end and back-end components. Examples of blockchain development frameworks include DappHub and Loom Network.

3. Web3.js Frameworks: These frameworks are designed to help developers interact with the Ethereum blockchain using JavaScript. They provide a set of libraries and tools that make it easier to work with smart contracts and other blockchain components. Examples of web3.js frameworks include ethers.js and web3.js.

4. Decentralized Application (dApp) Frameworks: These frameworks are designed to help developers build decentralized applications that run on blockchain networks. They provide a set of tools and libraries for building front-end and back-end components, as well as managing the deployment and scaling of the dApp. Examples of dApp frameworks include Embark and Drizzle.

5. Interoperability Frameworks: These frameworks help developers create interoperability between different blockchain networks, enabling them to transfer assets and data across different blockchain ecosystems. Examples of interoperability frameworks include Polkadot and Cosmos.

These are just a few examples of the different types of frameworks in Web3. Each type of framework provides unique capabilities and features that can help developers build better and more efficient decentralized applications on blockchain networks.

Libraries vs Frameworks

In Web3 development, both libraries and frameworks are important tools for building decentralized applications (dApps) on blockchain networks. Here are some key differences between Web3 libraries and Web3 frameworks:

Web3 Libraries:

A Web3 library is a collection of pre-written code that provides specific functionality for interacting with blockchain networks, such as Ethereum.

Web3 libraries often focus on a specific aspect of Web3 development, such as contract interaction, blockchain data retrieval, or transaction management.

They are typically smaller in scope and provide lower-level abstractions than Web3 frameworks.

Web3 libraries can help build custom solutions and integrate with other Web3 tools.

Examples of Web3 libraries include:

Web3.js: A JavaScript library for working on the Ethereum blockchain network.

ethers.js: A JavaScript library for interacting with Ethereum and other blockchain networks.

Ganache: A local blockchain simulator for testing smart contracts.

Web3 Frameworks:

A Web3 framework is a set of pre-written code and libraries that provides a standard way of building and organizing dApps on blockchain networks.

Web3 frameworks are typically larger in scope and provide higher-level abstractions than web3 libraries, abstracting away low-level details and providing a streamlined development process.

They are designed to simplify the development process and provide a set of standardized building blocks that can be reused across multiple applications.

Examples of Web3 frameworks include:

Truffle: A smart contract development and deployment framework for Ethereum.

Embark: A decentralized application development framework that provides front-end and back-end tools for building dApps on Ethereum.

DappHub: A full-stack blockchain development framework that provides tools for building dApps on Ethereum and other blockchain networks.

Overall, web3 libraries and web3 frameworks play crucial roles in web3 development. Web3 libraries provide specific functionality and can be used to build custom solutions, and Web3 frameworks provide a streamlined development process and standardized building blocks for building decentralized applications on blockchain networks.

Best Frameworks for Web3 in 2023

There are many frameworks available in Web3 to choose from. In such a case, how would you choose from the lot, and why would you choose only one?

Here, we’ve got 5. Not one, not two… five. The top five amazing Web3 Frameworks in 2023 are as follows:

Truffle

Everyone in the Web3 scene knows Truffle. A very sweet initiative by Ethereum, this is a popular smart contract development and deployment framework.

It provides a suite of tools for compiling, testing and deploying smart contracts, as well as a development environment for building dApps on Ethereum.

Embark

Embark is a decentralized application development framework that provides front-end and back-end tools for building dApps on Ethereum. It includes a development server, smart contract management tools, and a web3.js integration for interacting with the Ethereum blockchain.

DappHub

DappHub is a full-stack blockchain development framework that provides tools for building dApps on Ethereum and other blockchain networks. It includes a smart contract development environment, front-end development tools, and a decentralized hosting platform for deploying dApps.

Drizzle

Drizzle is a front-end development framework for building dApps on Ethereum. It provides a set of React components for interacting with smart contracts and blockchain data and a state management system for managing the application’s state.

Loom Network

Loom Network is a blockchain development platform that provides tools and infrastructure for building scalable dApps on Ethereum and other blockchain networks.

It includes a smart contract development environment, a decentralized hosting platform, and a set of interoperability tools for integrating with other blockchain networks.

These are just a few examples of the top web3 frameworks in 2023. Each framework provides unique features and capabilities for building decentralized applications on blockchain networks, and the choice of the framework will depend on the specific needs and requirements of the dApp being built.

The post What is a Framework? And what are Web3 Frameworks? appeared first on InnovaRise.

Oracles in Blockchain Technology

In blockchain technology, an oracle is a third-party application or service that provides off-chain data to a smart contract on a blockchain. Smart contracts are self-executing code that runs on a blockchain. These contracts operate in a trustless environment without mediators.

But smart contracts are limited to the data available on the blockchain. It cannot access external data from other off-chain data sources, such as real-world events or data from other systems.

Enter Oracles. Oracles provide a way for smart contracts to interact with external data sources by being a bridge between the blockchain and the world. For example, an oracle can obtain the current price of a stock, the temperature in a certain location, or the outcome of a sports game.

However, the use of oracles introduces new security and reliability challenges. Oracles are vulnerable to attacks like data manipulation or denial-of-service attacks. These attacks can compromise the integrity of the data they provide to smart contracts. Therefore, it is crucial to design and test oracles to ensure security and reliability carefully.

Overall, oracles play a crucial role in expanding the capabilities of smart contracts and enabling the integration of blockchain technology with the world.

The Need and Function of Oracles in Blockchain Technology

Oracles in blockchain technology are vital, as they link the blockchain to the external world. 

• The primary function of oracles is to provide off-chain data to smart contracts on the blockchain.
• Oracles enable smart contracts to interact with real-world events, such as the price of a stock, the weather conditions, or the outcome of a sports game. 
• Accessibility to external data is essential for smart contracts, as it allows them to perform many functions and automate more complex processes.

The need for oracles arises from the fact that the 

• Data stored on the blockchain is immutable, but limited to only the data available on the network itself. This means that 
• Smart contracts cannot access off-chain data sources without an oracle. 
• Oracles provide a secure and reliable way to obtain and verify external data, which is essential for the integrity of the smart contract’s execution.

In addition to providing data to smart contracts, oracles serve other functions, like triggering events based on external data, executing conditional contracts, and providing a way for smart contracts to interact with other systems. 

However, using oracles introduces new security risks to the blockchain ecosystem.

Oracles can be vulnerable to data manipulation or denial-of-service attacks, compromising the integrity of the data they provide to smart contracts. 

Therefore, it is necessary to carefully design and test oracles to ensure they are secure and reliable.

Advantages of Oracles in Blockchain Technology

Oracles provide several advantages in blockchain technology:

Access to external data: Oracles enable automated contracts to access external data. Accessing external data is essential for many blockchain functionalities. Automating complex processes and the execution of smart contracts are possible only because the contracts have access to external data.

Automation of processes: Oracles can automate the execution of processes that require external data, such as triggering a payment based on a particular event, without requiring intermediaries.

Flexibility: Oracle permits blockchain technology integration with other systems and technologies, such as IoT devices. The integration, in turn, expands the scope and potential uses of blockchain technology.

Security: Oracles provide a secure and reliable way to obtain and verify external data, which is essential for the integrity of the smart contract’s execution.

Decentralization: Oracles can be decentralized, which aligns with the principles of blockchain technology and eliminates the need for a central authority to provide external data.

Overall, oracles play a crucial role in expanding the capabilities of blockchain technology and enabling its integration with the world. Oracles extend blockchain technology’s application to a broader range of uses and industries by providing access to external data, automating processes, and improving security.

Summary

An Oracle is a software or a third-party service that provides information by predictions based on actions that have occurred in the past or recently. Oracles help make predictions with the help of data models and these aid humans to take informed decisions.

However, oracles in blockchain technology are used to provide off-chain data to smart contracts. By doing so, smart contracts can function better and automate their execution with ease.

Although Oracles extend their functions to create a better-decentralized way of functioning since it provides information from an external source, the decentral network has no power over the legitimacy of the data received.

Consequently, Oracles can be decentralized and web3 can be secure from misinformation. Once the security is taken off, the advantages such as external data access, flexibility, and process automation make working in web3 and deploying smart contracts a piece of cake!

The post What Is An Oracle In Blockchain Technology? appeared first on InnovaRise.

So, imagine if your DeFi wallet could now store multiple NFTs. Or your seed phrase in your wallet got lost. Or what if you could automate transactions from your wallet like a smart contract?

Well, account abstraction in Web3 turns those dreams into reality. And the Safe Wallet by the Gnosis chain is here to aid you on your journey to transition from your ordinary Web3 wallet to a smart contract wallet that is a game changer in Web3.

This blog explores Web3 wallets, account abstraction, and ERC 4337… and to top it off, we’re also looking at Safe Wallet from the Gnosis Chain and Wallet Connect.

We will also explore how Wallet Connect works with the SAFE wallet for a better UX.

A Brief on Web3, Cryptocurrency, and Web3 Wallets

Web3 is a decentralized iteration of the World Wide Web where data is open, transparent, accessible, and yet safe within the custody of the user and secure with encryption.

The idea for such a space came to Satoshi’s genius mind only to create Bitcoin. A peer-to-peer network where transactions can occur among friends and strangers. Transactions that are viewable but immutable by anyone present within the network

Wait! But how does one transfer currency here? Well, we have a different type of currency altogether. Gone are the days when you used Venmo or PayPal to pay your contact in € or ₹.

Thus, Web3 uses digital tokens as currency. These tokens are of a standard that represents a particular blockchain or organization.

Consequently, there are numerous coins from different blockchains, protocols, DEXs, DeFi organizations, DAOs, games, etc. And the total supply for each coin varies depending on the blockchain.

And again, where do you store these crypto coins? In a Web3 wallet that is compatible with the tokens and the standards, they are built in. 

Also read: Getting to Know Web3 Wallets

Simply put, Web3 wallets are specialized wallets in the decentralized space. These digital wallets store cryptocurrencies, NFTs, and stablecoins. Basically, all your Web3 assets.

However, they never work in an automated fashion and always require a party to sign when a transaction occurs. This ensures the security of the transaction, as the person who signs it is solely responsible for the transfer.

But, just imagine if they could work in an automated way — much like smart contracts in blockchain! Wouldn’t life be a little easier and nicer?

Account Abstraction and ERC 4337 

Account abstraction is a concept in decentralized finance (DeFi) and Web3 that allows users’ Web3 wallets to interact with smart contracts without needing to hold or manage the underlying cryptocurrency themselves.

With account abstraction, users can pay transaction fees in any cryptocurrency, rather than being limited to the specific token used by the smart contract. This means that users can participate in DeFi applications without needing to hold multiple cryptocurrencies or worry about gas fees.

Additionally, account abstraction allows for more complex transaction types, such as escrow or atomic swaps, to be executed on the blockchain with greater ease and efficiency. Account abstraction makes DeFi more accessible and efficient.

Moreover, account abstraction within smart contracts enables users to interact with decentralized applications without requiring the specific cryptocurrency the contract uses. It simplifies the transaction process by allowing users to pay fees in any cryptocurrency. 

Realtime Use Cases of Account Abstraction

Account abstraction is a great way to automate many DeFi processes from a wallet or an account. Some examples where account abstraction aids in real-time are:

Decentralized exchanges (DEXs):

Account abstraction enables users to trade tokens on DEXs without holding the specific cryptocurrency to pay transaction fees. With this feature, account abstraction makes it easier and more cost-effective for users to participate in trading activities.

Cross-chain atomic swaps:

Account abstraction facilitates cross-chain atomic swaps between different blockchain networks. With account abstraction, users can send and receive tokens on different blockchains without needing to hold multiple cryptocurrencies. Thus simplifying the transaction process and making it more accessible to a wider range of users.

Escrow services:

Account abstraction aids in creating decentralized escrow services where two parties can agree to a transaction and hold their tokens in a smart contract until certain conditions are met. With account abstraction, users can pay transaction fees in any cryptocurrency, making it easier and more cost-effective to use escrow services for various purposes, such as online marketplaces or dispute resolution.

Account Abstraction and Ethereum

Account abstraction makes Ethereum more flexible and scalable by reducing the need for users to hold multiple cryptocurrencies and simplifying the transaction process. By enabling users to pay transaction fees in any cryptocurrency, account abstraction makes it easier for users to interact with decentralized applications, including DeFi.

Further, this reduces the burden on the Ethereum network, leading to increased scalability. 

Additionally, account abstraction allows for more complex transaction types, like atomic swaps, which execute with greater efficiency and lower costs.

Overall, account abstraction enhances the flexibility and scalability of the Ethereum network, making it more accessible and usable for a range of users and use cases.

The ERC 4337

What started as an EIP 4337 [Ethereum Improvement Proposals], the ERC 4337 is an Ethereum Request for Comment #4337 that allows a wallet or an account to have account abstraction functionality without changes occurring at the consensus layer.

Deployed to the network on March 20, 2023, this standard helps automate certain transactions like smart contracts. The system contains an object called UserOperation that carries the details of the transaction and the required signatures.

Further, EIP 4337 is a proposal that’s ready to deploy because it doesn’t change the protocols at the consensus levels and only aids in better transactions.

Need for ERC 4337

We know that smart contract accounts only deploy as per predefined conditions within the network. As per Ethereum’s documentation, the need for EIP 4337 and ERC 4337 arose because, although smart contract accounts are available, one cannot operate the accounts like an EOA. 

Despite that, Ethereum believes that the ERC4337 standard will bring a lot more benefits to the blockchain than account abstraction. This would further ease its functions for users, validators, and nodes.

Further, ERC 4337, not only provides smart contract functionality to the contract but also bundles up transactions. Bundling transactions eases the hassle of multiple signatures for multiple transactions occurring from the same wallet.

Did anyone tell you about the recovery feature of crypto wallets yet? Because recovering seed phrases/ private keys just got easier. Well, that’s an account abstraction for you!

Benefits of ERC 4337

The ERC 4337 token from Ethereum came with a lot of benefits. The most benevolent benefits blockchain has are:

1. Account Abstraction: Give users access to a single account with the smart contract and EOA functionality. 

2. Decentralization: Enable participation from any purported bundlers. 

3. Consensus Changes: As the Ethereum consensus layer concentrates on scalability-oriented upgrades, avoid consensus changes to facilitate speedier adoption

4. Novel Use Cases: There are novel use cases such as aggregated signatures, daily transaction limits, account freezing in an emergency, whitelisting, and privacy-preserving software..

5. Savings: One can save on gas and time because bundlers can combine UserOperation objects into a single operation. 

Benefits of Account Abstraction

Account abstraction makes the Web3 smart contract account behave like an EOA. Some benefits of account abstraction are:

1. Better UX: Account holders can now go through a transaction process where they need not look into the nitty-gritty details of the transaction. It also makes it easier to interact with DApps and other Web3 protocols.

2. Complex Transactions: Account Abstraction enables complex transactions, such as sending money from escrow services. These transactions occur on the blockchain through smart contracts that contain the code to follow the instructions.

3. Network Load: By letting users pay transaction fees in almost any cryptocurrency, account abstraction reduces the network load multifold, especially on Ethereum.

4. Interoperability: Account abstraction allows for interoperability between blockchains and multiple Web3 accounts. The interoperable function makes it easier for users to shift between blockchains whenever they want to.

5. Enhances Security: Account abstraction enhances security by letting users send and receive tokens without exposing their private keys or requiring them to hold multiple cryptocurrencies.

The Safe Protocol

What is the Safe Protocol?

The Safe Wallet, by the Gnosis Chain, is a non-custodial wallet that runs on account abstraction. The smart contract-based digital wallet service comes from Gnosis Safe. This protocol came into existence to provide a safer, more secure, and easier way of transferring digital assets over Web3.

Further, this open-source project contains protocols, APIs, and SDKs for programmers to integrate the protocol into their applications. It’s quick, efficient, and, most of all, easy to work with while making your Web3 wallets secure.

So, why should you adopt the SAFE protocol? Because the features and advantages this protocol provides are like no other. Don’t believe it? Well, here’s a list of features and advantages one may have with the Safe protocol.

Features of the Safe Protocol

Some of the main features of the Safe Protocol are:

1. Easy On-Boarding: Using Web3 Auth to authenticate sign-in, the Safe protocol allows for an easy transition for users new and old to Web3.

2. Wallet-less Sign-in: Users can now sign in to their accounts without connecting to a wallet address. They can sign in with the sign-in account the user has.

3. Gas-less Transactions: Gelato provides users with gas-less transactions, i.e., although one may have to pay a fee, the gas fee would be much less than before.

4. Transaction fee Flexibility: Although one cannot escape the transaction fee, one can choose how to pay. One can either pay with the native token or the ERC-20 token. So, one needn’t worry if they are low on ETH.

5. Purchasing Power: The Safe Wallet Protocol allows one to purchase digital assets such as cryptocurrencies and NFTs using crypto coins or credit cards! [This feature is still being built with careful consideration and limitations on functionality.]

6. Self-custody: The wallet is yours to control. All the data and asset information present are not under the control of or visible to a third party.

7. Multisig Transactions: A wallet is in the control of multiple parties, i.e., a transaction cannot occur without the voting and approval of the majority of the co-owners. Thus providing a more secure wallet with multiple private keys.

8. Account Abstraction: One of the most amazing features that Safe Wallet offers is account abstraction. The safe wallet attains this feature by executing smart contracts with predefined conditions. 

Advantages of the Safe Protocol

The Safe Wallet by Gnosis is a non-custodial Ethereum wallet that offers several advantages, including:

1. Enhanced Security: The Safe Wallet incorporates multiple security features, including multi-signature functionality and hardware wallet integration, to ensure your funds are safe and secure.

2. Customizable Access Control: With the Safe Wallet, you can set up custom access controls, including multi-factor authentication and time-based restrictions, to ensure that only authorized parties can access your funds.

3. Easy Management of Multiple Assets: The Safe Wallet supports multiple assets, including ETH, ERC20 tokens, and NFTs, and offers an easy-to-use interface for managing your holdings.

4. Support for DeFi Applications: The Safe Wallet is integrated with popular DeFi applications such as Uniswap, Compound, and MakerDAO, making it easy to manage your investments and earn yield.

5. Open-source and Community-driven: The Safe Wallet utilizes open-source software. It is maintained by a community of developers and contributors, ensuring that it is constantly evolving and improving.

6. Multi-chain Functionality: The Safe wallet is compatible with most of Web3’s prominent blockchains, such as Polygon, Optimism, Aurora, Arbiutrum, Ethereum, and Gnosis (of course). One can use their wallet across different blockchains for various needs and have an easy time signing in and signing out.

Security of Wallets Within Safe

The security of the Safe Wallet comes from the multi-signature character it possesses. Having multiple parties take control of the transaction only means that the transaction has been approved and wasn’t faux.

Further, the essence of the multi-signature wallet’s security comes from each individual co-owning the wallet having different private keys. No one can validate a transaction using someone else’s private key. 

Consequently, the smart contract-based wallet protocol is crucial to secure the wallet. So, let’s see how digital agreements aid in wallet security.

How Safe Wallets Work

The Safe Wallet Protocol is a smart contract-based digital wallet system that utilizes multi-signature technology to provide enhanced security features. Here’s a simplified explanation of how it works:

Wallet Creation: To create a Safe wallet, a user sets up a smart contract on the Ethereum blockchain using the Safe Wallet Protocol. The user then defines a list of addresses that can control the wallet, including their own and those of any other individuals or entities they choose.

Multi-Signature Authorization: Transactions sent from the Safe wallet get executed if a specified number of authorized signatures are present.

For example, if the wallet is set up such that it requires two signatures to authorize a transaction, both of the authorized signers must provide their signatures for the transaction to execute.

Enhanced Security: The multisig feature within Safe tightens security for the digital assets present in a wallet. This helps protect against hacks, thefts, and other security risks when using a single-signature wallet.

User-Friendly Interface: In addition to its security features, the Safe Wallet Protocol also offers a user-friendly interface for managing wallets based on the protocol. The Gnosis Safe team provides a web-based interface that allows users to easily view transaction history, manage multiple wallets, and customize wallet settings.

Overall, the Safe Wallet Protocol provides a secure and user-friendly way to store and manage digital assets on the Ethereum blockchain. It offers enhanced security features, multi-signature authorization, and a user-friendly interface to make it accessible to users with varying levels of technical expertise.

Account Abstraction with Safe Protocol

The Safe Protocol attains account abstraction without ERC 4337. Additionally, the protocol allows for a Web3 wallet that can run from the command lines present within the smart contract.

Smart contracts are tailored in a way to suit the needs of traditional external accounts and can deploy the necessary transaction upon meeting the prerequisite conditions.

It allows for multiple transactions to occur at once while sending them across the block with a much lower gas fee.

Wallet Connect and Safe

What is Wallet Connect?

Wallet Connect is an application that facilitates connections between DApps and Web3 wallets.

Why is connecting wallets essential in Web3?

Well, everyone knows that to work in Web3 and use any application in Web3, one must connect their Web3 wallet to the particular DApp.

The Web3 wallets behave not only as a mode of “signing in” but also as an account or identity with a particular Web3 wallet address.

Consequently, it allows users to interact with multiple DApps and multiple blockchains. This then further allows them to interact with DApps and sign transactions without showing their private keys to DApps or other private servers.

Further, the protocol increases interoperability between different blockchains and different DApps at a multichain level.

A user can sign in to all the DApps with just one click! How? 

The Working of Wallet Connect

While the protocol uses a QR code to scan and sign in, it protects the integrity of the code through the presence of cryptographic key pairs. The cryptographic key pairs establish a secure connection between the user’s wallet and the Wallet Connect platform.

Features of Wallet Connect

Web3Modal: With Wallet Connect’s library, Web3Modal, one can easily operate with the multichain interface and manage all the wallet connections from a single view.

Sign: You can sign in once to all your wallets and ensure that all the transactions facilitated by the Wallet Connect platform are secure. Moreover, you need not face the risk of losing your private key to a third party.

Auth: All you need to do is sign in once, and you can access any part of Web3 because of interoperability between chains and networks. Your sign-in is safe. Also, you only need to either click or scan a QR code.

Push: Experience real-time Web3 with Push Notifications and don’t miss a thing. All blockchain activity, news, and updates come straight to your wallet. You can enable notifications and be constantly updated about the Web3 world.

Chat: Talk to your friends on the decentralized web with a private, Web3 wallet address-based chatroom. You can send texts, gifs, stickers, and crypto! Moreover, the ChatAPI works across platforms and chains, i.e., it can facilitate messages between any two WalletConnect users despite the current chain they are present in.

Advantages of Wallet Connect

Seamlessly login to Web3: Experience a one-click login to all of Web3 with Wallet Connect. Alternatively, scan your QR code and log in to all the DApps, DEXes, NFT Marketplaces, and any application on Web3.

Verification and Security:  Wallet Connect does not store your private keys. But it also does not share your private information and private keys with other blockchains or organizations. While taking such steps towards security, the transactions are verified many times to maintain integrity within the blockchain.

Multichain functionality: Want to use an ETH-specific DApp? Go ahead, feel free to change your DEX from Uniswap to BSC, or come over to Polygon’s testnet and test a few transactions.

because multichain operations just became hassle-free.

Web3 Interoperability: Apart from multichain operations, DApps and wallets across Web3 can interact together and provide the user with an amazing and seamless Web3 experience.

Wallet Connect and the Safe Wallet

Wallet Connect works with more than 50 wallets across Web3. These wallets are custodial, non-custodial, hybrid, smart contract, and NFT wallets.

Amongst the lot, one of them is the Safe Wallet from the Gnosis Chain. So, not only does WalletConnect support major networks like Ethereum, which holds many wallet projects, but it also supports good projects on a single chain. 

So, apart from all the benefits, Safe offers us while using Wallet Connect, it also helps with increased security for passcodes, private keys, sign-ins, and transactions.

Moreover, the gas fee or transaction fee becomes less while interoperability increases.

Summary

Account Abstraction is when a smart contract enables a Web3 wallet to behave like an EOA and perform multiple functions. Although many smart contract wallets are available, the ERC 4337 provides more than just account abstraction to the network.

Further, the Safe Protocol by the Gnosis Chain has protocols, APIs, and SDKs that aid in account abstraction of the Safe Wallet.

To top that off, WalletConnect provides a secure and easy way of connecting to multiple DApps with one common sign-in feature for all wallet accounts.

The post Account Abstraction with Safe Protocol appeared first on InnovaRise.

In this blog, we’ll recap what Web3 and Web 3.0 are. And later, see how blockchain technology helps the metaverse become a decentralized version of a virtual universe. We’ll also explore the challenges blockchain technology might face in implementing its protocols in artificial reality.

Okay, so before we head to the break of Web3 and Web 3.0, I need you to realize that the previous iterations of the world wide web are pretty much the same.

Web 1.0 was a read-only web, which evolved into a read-and-write web — Web 2.0. The additional features in Web 2.0 were the secure login from the central ID and making it more interactive.

On Web3

Web3 is a decentralized version of cyberspace. A rendition where a digital (virtual) ledger stores all information passed, messages relayed, and details of payments.

Further, the information in each block is secure with encryption. A private key helps one decrypt the message inside the block. 

Consequently, the public key behaves as the identity of the wallet address. The encryption makes sure that the information is safe inside the ledger.

Furthermore, multiple computers verify the transactions and carry out the role of miners or validators. These validating checkpoints are often known as “nodes.”

Some of the features of Web3 are decentralization, transparency, security, collaboration, permissionless-ness, and trustlessness.

On Web 3.0

The Semantic Web experience starts with a version of the Internet comprising features such as machine learning, artificial intelligence, and the Internet of Things.

Further, Web 3.0 easily integrates with the current version. Data collection through third-party servers, personalized content, efficient search data based on your preferences, and data interoperability across platforms and devices are all part of the Semantic Web experience.

On Blockchain and Metaverse

Blockchain is a tool for the third iteration of the World Wide Web. The goal of this version of cyberspace is decentralization.

The meta-universe, on the other hand, is an extension of the IoT. It provides a space for humans to escape reality and immerse themselves in an XR [X = virtual, augmented, generally, extended reality].

Blockchain + Metaverse = A WONDERFUL EXPERIENCE

We’re now aware of Web3 and Web 3.0. This section explores the possibilities of how Web3 and Web 3.0 can come together to make XR an amazing decentralized reality.

In addition to the advantages that DLT brings, blockchain technology has a revolutionary potential to create and interact with XR.

Blockchain technology can revolutionize the metaverse experience by providing several key benefits that can help make the metaverse platform better. Some ways are:

Decentralization

A blockchain-based metaverse can be decentralized, meaning that the power and control of the platform are distributed among its users rather than being centralized in the hands of a few individuals or organizations. Decentralization can help create a more democratic and fair metaverse, where users have a say in the platform’s development and management.

Security

Blockchain technology provides a high level of security, making it possible to create a secure and trusted metaverse that protects users’ data and assets. Through encryption and other security measures, blockchain-based metaverse platforms can ensure that users’ information is private and that secure transactions occur.

Interoperability

Blockchain technology can enable interoperability between different metaverse platforms, allowing users to move seamlessly between different virtual worlds and transfer assets and data across platforms. Interoperability can create a more interconnected and vibrant metaverse ecosystem.

Digital Ownership

A blockchain-based metaverse enables users to own and control their digital assets and data and lets them buy, sell, trade, and transfer virtual assets like NFTs and cryptocurrencies. Thus creating a new economy within the metaverse, where users can earn real-world value from their virtual assets.

Transparency

Imagine a metaverse with the features of a blockchain. A virtual land where data is transparent yet secure, actions are accountable, and everyone participates in decision-making.

By employing smart contracts and other tools, developers can create a transparent and auditable system for managing the interactive platform.

But… Blockchain and Metaverse Needs to Solve a Few Issues First.

Sure, we can have a blockchain-based metaverse. You can try some of the blockchain-based metaverses such as The Sandbox, Decentraland, Enjin Coin, and much more. But wait for Q4 of 2023, when you can explore Shiba Inu’s metaverse platform too!

However, before we create and build an entire virtual universe on a blockchain (layer), we must first realize that creating a metaverse that runs on a blockchain is a complex task. The task presents several challenges and problems. Some of the major problems are:

Scalability

One of the biggest challenges in building a blockchain-based metaverse is scalability. The number of transactions and data stored in a blockchain can be overwhelming, leading to slow processing times and high fees. Developers will need to find solutions to increase the scalability of their blockchain platform to accommodate a large number of users.

Potential Solutions

Sharding: Developers can use sharding to break up the blockchain into smaller, more manageable parts that can process transactions independently, which can significantly increase the network’s capacity to handle a large number of transactions.

Layer-2 scaling solutions: Developers can use layer-2 scaling solutions such as side chains or state channels to process transactions off the main blockchain, reducing the computational requirements of the network.

Upgrade the consensus mechanism: Developers can explore alternative consensus mechanisms that prioritize scalability, such as proof-of-stake (PoS), which requires less computational power to validate transactions than proof-of-work (PoW) mechanisms.

Interoperability

Different blockchain networks may have different technical specifications, which can create interoperability issues when connecting different parts of the metaverse. Developers must ensure that the various components of the metaverse can communicate with each other seamlessly, regardless of the underlying blockchain technology.

Potential Solutions

Develop common standards: Developers can work together to develop common standards for blockchain interoperability. Standards ensuring that different blockchain networks can communicate seamlessly.

Cross-chain bridges: Developers can use cross-chain bridges to connect different blockchain networks and facilitate the transfer of assets and data between them.

Middleware: Developers can use middleware solutions that act as intermediaries between different blockchain networks to facilitate communication and interoperability.

Security

A secure blockchain-based virtual space would prevent hacks and other security breaches that could cause significant damage. Developers must implement robust safety measures to ensure users’ data and assets are safe from cyberattacks.

Potential Solutions

Encryption: Developers can use encryption to protect users’ data and assets from cyberattacks.

Multi-factor authentication: Developers can implement multi-factor authentication to provide an additional layer of security for user accounts.

Conduct regular security audits: Developers can conduct regular security audits to identify and address vulnerabilities in the platform.

User Adoption

One of the biggest challenges for a new metaverse is attracting users to the platform. Developers need to create a platform that is user-friendly and offers compelling features to encourage users to join and stay.

Potential Solutions

Focus on user experience: Developers can focus on creating a user-friendly platform that is easy to navigate and offers compelling features that appeal to users.

Offer incentives: Developers can offer incentives such as rewards or bonuses to encourage users to join and stay on the platform.

Leverage social media: Developers can leverage social media to promote the platform and attract new users.

Decentralization

A decentralized metaverse would mean that users get to control the platform with equal power vested in everyone. Decentralization demotes centralization and promotes openness, transparency, and democracy.

Potential Solutions

Decentralized governance: Developers can implement decentralized governance mechanisms that give users a say in how the platform develops and operates.

Scattered storage: Developers can use decentralized storage solutions to ensure that data is stored in a decentralized manner, reducing the risk of data breaches.

Individual identity: Developers can use individual identity solutions to ensure that the user controls their identity. This provides them with ownership and responsibility.

Summary

In summation, Web3 and Web 3.0 are very different concepts that aim to make the internet a better place. While Web3 deals with a decentralized version of the internet with smart contracts, nodes, staking rewards, and DeFi, Web 3.0 deals with XR, IoT, machine learning, and artificial intelligence.

Further, it is possible to have a metaverse built on top of a blockchain to experience a decentralized environment. A metaverse that is transparent, stores information, messages, and payment details in blocks, and provides security through encryption, is a wonderful concept.

But Web3 will have to pull through some problems about Scalability, Interoperability, Security, User Adoption, and Decentralization. When the right steps are taken to sort out the issues, a developer can seamlessly create a world of their own on a blockchain.

The post Merits of Blockchain and Blockchain’s Challenges With Metaverse appeared first on InnovaRise.

A Merkle Tree is a data structure used in blockchain technology to verify the integrity of large data sets efficiently.

In a Merkle Tree, data is organized into a tree structure. Here, each leaf node represents a specific piece of data (such as a transaction in a blockchain). Each node in the tree, except for the leaves, is the hash of its two child nodes.

The root of the tree, also known as the Merkle root, is the hash of the top two nodes in the tree, which in turn are the hashes of their child nodes. This process continues until only a single hash value, the Merkle root, remains.

Why is it called the Merkle tree? Merkle/Hash trees get their name from Ralph Merkle, who registered the idea in 1979.

Role of a Merkle Tree in Blockchain Technology

Merkle Trees in blockchain technology efficiently verify a particular transaction or block. If the transaction is part of a block, it verifies the transaction without verifying the entire set. The verification occurs by providing a compact proof consisting of a set of hashes along the path from the transaction to the Merkle root.

Further, Merkle trees have applications as a data structure for data attestation and synchronization. In addition, Merkle trees also strengthen security by encrypting blockchain data.

Features of a Merkle Tree

A cryptography data model is a Merkle tree. Yet, the hash list is an extension of this hash-based dataset. Each leaf node is a hash of a data block, and each non-leaf node is a hash of the offspring of that leaf node. Merkle trees often have a branching factor of two, implying that each leaf node could possess up to two little leaves.

Some other features of a Merkle tree are as follows:

• A binary tree structure where each non-leaf node is a hash of its child nodes.
• Leaf nodes represent small pieces of data, such as transactions in a blockchain network.
• Verifies huge amounts of data efficiently.
• Allows nodes to verify the data without downloading the entire block.
• Ensures data integrity and security through cryptographic hashing
• Can detect any modification or tampering of the data.
• Enables Merkle proofs, a method of proving data membership in the tree without revealing the data itself.
• Employed in various applications beyond blockchain technology, such as distributed file systems and network security.

Verification by a Merkle Tree in Blockchain Technology

A Merkle tree accumulates all transactions in a ledger and creates a digital fingerprint of the complete set of operations, letting the user verify whether it contains a transaction in the block.

Additionally, the Merkle tree in the digital ledger technology accurately checks the transactions by hashing data in pairs repeatedly until only a single root hash remains. This allows nodes to assess the data without downloading the entire data on the block, ensuring data integrity and security through cryptographic hashing.

Considering a Merkle Tree is a USPTO-patentable algorithm and data structure, you cannot use it economically unless you obtain Ralph Merkle’s consent or pay him a royalty.

Advantages of a Merkle Tree in Blockchain Technology

Here are five advantages of Merkle Trees in the blockchain:

1. Efficient verification: Merkle Trees enable efficient and quick confirmation of data integrity without downloading the entire dataset. The Merkle root provides a compact summary of the complete dataset, making it faster and more efficient to verify.

2. Security: Since Merkle Trees rely on cryptographic hash functions, it gets challenging to tamper the data in the tree. One cannot tamper with the information without being detected. Any changes to the data will result in a different hash value, and the Merkle root will no longer match.

3. Scalability: Merkle Trees can handle large amounts of data and provide efficient verification. Thus making them ideal for use in large-scale blockchain networks where data integrity is crucial.

4. Simplified data handling: By organizing data into a tree structure, Merkle Trees simplify the handling of large amounts of data. This can reduce the complexity of managing blockchain transactions and ease data input into the digital ledger.

5. Reduced storage requirements: Merkle Trees can reduce the storage requirements for large data sets. Rather than storing every transaction or block in the chain, the Merkle root provides a compact summary of the entire dataset, which can significantly reduce the amount of storage required.

Uses of a Merkle Tree

Merkle trees have several uses in various fields, including:

1. Blockchain Technology: Merkle trees are extensively used in blockchain technology to verify the integrity of transaction data. In blockchain networks like Bitcoin and Ethereum, Merkle trees help construct the block header, which contains a summary of all the transactions on the block. Thus allowing nodes to efficiently verify the data without downloading the entire ledger.

2. Data Structures: Merkle trees get employed in various data structures like hash tables, distributed file systems, and version control systems. In distributed file systems like InterPlanetary File System (IPFS), Merkle trees represent the content-addressed file system, where the cryptographic hash is unique to every file.

3. Cryptography: Many cryptographic applications use Merkle trees for key management, digital signatures, and identity management. For example, in a Merkle signature scheme, a Merkle tree is used to construct a signature for a big data set, where verification needs only a small subset of the information.

4. Network Security: Merkle trees strengthen network security. They help to detect any data tampering or alteration. For example, in Secure DNS (Domain Name System), a Merkle tree is used to ensure the authenticity and integrity of the DNS records.

5. Gaming: Merkle trees can be used in gaming applications to prove the fairness and randomness of the game. In a provably fair game, a Merkle tree shows how the outcome of the game is random and the game is not rigged.

Overall, Merkle trees are a versatile and widely used data structure that provides efficient and secure ways to handle big information files.

Summary

A Merkle Tree is a tree of cryptographic hashes that helps to verify the sequence of the transactions (and the transactions themselves) within the block.

Further, the name comes from the inventor, Ralph Merkle, and plays an integral part in Blockchain Technology. Merkle Trees ensure security, ease verification of transactions, simplify data handling and reduce storage requirements. Eventually, the branch of hashes ensure the block tags the verified chain of block ledgers in the network.

Hashes are a type of encryption. Want to know more on Hashing? Check out our blog on Types of Encryption in Blockchain Technology.

The post What Is A Merkle Tree in Blockchain Technology? appeared first on InnovaRise.

Functioning of Web3 Wallet

Web3 Wallet Creation

The first step is to create a Web3 wallet, which can be done through various providers such as Metamask, MyEtherWallet, Trust Wallet, and others. During this process, the user will create a unique username and password and sometimes, a recovery key or seed phrase for backup purposes.

Web3 Wallet Accession

Once the user has created their Web3 wallet, they can access it through a browser extension or mobile app. The Web3 wallet will connect to the blockchain network, such as Ethereum or Binance Smart Chain, and display the user’s balance of digital assets.

Digital Asset Transactions

The user can send and receive digital assets, such as Bitcoin or Ethereum, directly from their Web3 wallet. To send digital assets, the user will need to input the recipient’s address and the number of assets to be sent. To receive digital assets, the user will need to provide their wallet address to the sender.

dApp Interaction

Web3 wallets allow users to interact with dApps on the blockchain network. When a user accesses a dApp, the Web3 wallet will prompt the user to connect their wallet to the dApp. This connection allows the user to make payments on the dApp, such as buying and selling digital assets or participating in decentralized finance (DeFi) activities.

Signing Transactions

When a Web3 transaction occurs, the user signs the transaction with their private key upon a prompt. This signature verifies the transaction and authenticity to prevent unauthorized access to the assets or commit fraud.

Managing Digital Assets

Web3 wallets can manage many digital assets, such as cryptocurrencies, non-fungible tokens (NFTs), and other digital assets. Users can view their balances and transaction history for each value within the Web3 wallet.

Maintaining Security

Web3 wallets are designed to maintain security and prevent unauthorized access to the user’s digital assets. To maintain security, users should keep their private keys and recovery phrases safe and secure and never share them with anyone.

Eventually, Web3 wallets provide users with a secure and convenient way to manage their digital assets and interact with decentralized applications on blockchain networks. By connecting to the blockchain network and using private keys to sign transactions, Web3 wallets allow users to send and receive digital assets, participate in decentralized finance activities, and manage multiple digital assets from a single platform.

Web3 Wallet Authentication

Authentication is an essential part of using decentralized wallets, as Web3 wallets store digital assets and interact with decentralized applications (dApps). To prevent unauthorized access and protect user funds, authentication is crucial. Web3 wallets use a combination of public and private key cryptography to authenticate users and authorize transactions.

Further, when a user creates a Web3 wallet, a public key and a private key are generated, which are used to identify the user’s wallet and sign transactions, respectively. Web3 wallets prompt users to input their private key or sign a transaction using their private key to verify them.

Following, the signature is verified by the network ensuring that the payment is genuine and authorized by the user. Moreover, these wallets also offer additional security features such as two-factor authentication (2FA) and biometric authentication (e.g., fingerprint or face recognition) to provide further protection to user accounts from unauthorized access.

Consequently, a Web3 wallet authentication occurs by simply signing in by connecting the wallet to the dApp. This doubles as an identity for the user in the DLT universe, thus providing a seamless experience.

Uses of Web3 Wallets

Alternatively known as decentralized wallets, Web3 wallets interact with decentralized applications (dApps) on blockchain networks such as Ethereum, Binance Smart Chain, and others. Some other examples of the uses of Web3 wallets are:

Storing Cryptocurrencies: The primary use case of a Web3 wallet is to store cryptocurrencies, such as Bitcoin, Ethereum, and other digital assets. These wallets allow users to manage their digital assets directly, without a central authority or intermediary.

dApp Interaction: Web3 wallets allow users to interact with dApps on blockchain networks. Users can sign transactions verify their identity, and make payments using their Web3 wallet.

Blockchain Governance: Web3 wallets allow users to participate in blockchain governance by voting on proposals, making suggestions, and contributing to the expansion of decentralized networks.

Trading Cryptocurrencies: Web3 wallets are useful for trading cryptocurrencies directly on decentralized exchanges (DEXs) such as Uniswap and PancakeSwap. These DEXs allow users to trade cryptocurrencies without a centralized exchange.

NFT Transactions: Web3 wallets can be used for buying, selling, and storing non-fungible tokens (NFTs), unique digital assets in the Web3 ecosystem.

Overall, Web3 wallets provide users with greater control, privacy, and security over their digital assets and transactions on blockchain networks.

Summary

The functioning of a Web3 wallet starts with its creation and address generation. One can access the digital wallet from browser extensions or mobile applications. Further, these digital wallets sign transactions and ensure secure payment. 

Moreover, Web3 wallets provide an identity, to store NFTs and other cryptocurrencies. It can also help in trading your crypto assets, help with blockchain governance, and help you interact with DApps.

If you’re ready to start using your Web3 wallet beware to choose from the top Web3 wallets for 2023 and set afoot in the world of Web3!

The post Functioning and Uses of Web3 Wallets appeared first on InnovaRise.

Introduction to a Nonce in Web3

A nonce is a a random number that validates transactions or carries out security checks.

When a transaction is sent from a wallet to a blockchain network, it includes a nonce. The nonce prevents replay attacks, which occur when an attacker intercepts a transaction and tries to send it again to the network. By using a nonce, the blockchain network can ensure that each transaction occurs only once.

The nonce ensures the correct order of transactions. Transactions process in the order in which they arrive at the network; the nonce helps ensure that each transaction processes in the correct sequence.

DID YOU KNOW? The word ‘Nonce‘ is a portmanteau of “Number only used once“

Nonce for Web3

A nonce is necessary for Web3 as it aids Web3 in several ways:

Preventing Replay Attacks: A nonce helps prevent replay attacks. Replay attacks are a type of attack where an attacker intercepts a valid transaction and tries to send it again to the network. 

Consequently, without a nonce, the network would not distinguish between the original and the duplicate transaction. Thus processing the same transaction multiple times. 

Therefore, a nonce helps the blockchain network to process the transaction only once. Further, the nonce prevents the attacker from replaying the transaction.

Ensuring Correct Order of Transactions: In blockchain technology, transactions occur in the order in which they arrive on the network. If multiple transactions deploy from the same account, a nonce ensures transactions occur in the right order. If the transaction does not process in the right order, it could result in an incorrect state of the account or even a failed transaction.

Preventing Stale Transactions: When a transaction with a specific nonce arrives at the network, all subsequent transactions with the same nonce hits pause until the original transaction processes. This helps prevent stale transactions, which occur when an outdated transaction is submitted to the network after a more recent one.

Enforcing Transaction Atomicity: A nonce also helps enforce transaction atomicity. That means a transaction either processes completely or not at all. By using a nonce, the blockchain network ensures that a transaction cannot be partially processed or duplicated.

In summary, a nonce is necessary in Web3 to prevent replay attacks, ensure the correct order of transactions, prevent stale transactions, and enforce transaction atomicity. It helps to maintain the security and integrity of the blockchain network.

Features of a Nonce

Some features of a nonce in Web3 include:

1. Uniqueness: Each nonce is unique, so it launches only once. This ensures that each transaction is processes only once and prevents replay attacks.

2. Sequentiality: Each nonce sequentially increments for each transaction sent from the same account. Thus ensuring that transactions process in the correct order.

3. Immutability: Once a transaction processes on the digital ledger, the nonce for that account is invalid to use again. This helps prevent issues such as double-spending and ensures transaction atomicity.

4. 64-bit Integer: Nonces are 64-bit integers in Web3. This provides a range of possible nonce values, which reduces the likelihood of nonce collisions.

5. Irreversible: Nonces are irreversible. It is impossible to determine the previous nonce value based on the current nonce value. This adds an additional layer of security to the blockchain network.

Overall, the features of a nonce in Web3 promises security, integrity, and reliability of the network by preventing replay attacks, enforcing transaction atomicity, and ensuring the correct order of transactions.

Working of a Nonce in Web3

In Web3, a nonce is a unique identifier that attaches to each transaction sent from a Web3 account. When a transaction arrives at the network, the nonce value in the transaction must match the current nonce value of the account.

A blockchain network uses the nonce to ensure that each transaction occurs only once and in the correct order. The nonce then sequentially increments for each transaction that comes from the same account. The blockchain network easily detects if another transaction with the same nonce value took place.

If a transaction with a nonce value that does not match the current nonce value of the account is received by the network, the blockchain marks the transaction as invalid. This helps prevent replay attacks, where an attacker tries to resend a previously processed transaction.

Overall, the nonce plays a crucial role in maintaining the security and reliability of the network by ensuring the correct order of transactions, preventing replay attacks, and enforcing transaction atomicity.

Summary:

In summary, a nonce in Web3 is a unique identifier assigned to a transaction to ensure that it is processed only once and in the correct order. They secure the blockchain by monitoring the presence of nonce numbers and making sure a nonce number does not repeat. A repeated nonce is a representation of a repeated transaction.

Further, the nonce present once will never generate in the same sequence and allows for transactions to occur sequentially. Nonces are immutable and irreversible. They bring safety to the DLT through this mode of encryption characterized by 64-bit integers.

While smart contracts don’t generate nonce for the transactions they process, they borrow a nonce from the address that created the contract. This behaves as a source stamp and tells us that the smart contract was able to execute the transaction without a problem.

A problem only arises when a second transaction with the same nonce value processes in the blockchain. Since it’s impossible to have two nonces of the same value, the blockchain marks the latter transaction as invalid.

Did you have fun learning about nonces? Do comment and let us know what you’d like to read next and until then, you might want to check out How Virtual Machines Are Useful in WEB3!

FAQs 

The post The Nonce-Sense in Blockchain Technology and How It Helps WEB3 appeared first on InnovaRise.

So, we’ll be viewing this in 4 parts, each with its listicle and a light description to give you an idea about the hack.

1. Hacks from 2016 – 2020
2. Hacks in 2020 (Just the list.)
3. Hacks in 2021
4. Hacks in 2022

Lastly, we’ll end with a summary of the hacks and impacts it has had on the Web3 community and economy. So, let’s go!

Web3 Hacks Since 2016

DeFi hacks have had an immense impact on the DeFi economy. The first hack the DAO Attack in 2016 shook everyone – Especially Ethereum.

And how is a 1.5 yr old blockchain supposed to know it would be vulnerable and taken advantage of?

That was when everyone got a boon and a bane.

The lesson is that Web3 is susceptible to code vulnerabilities and information copied to the dark web which hackers exploit repeatedly.

The first few years were when Web3 was growing up – having more DAPPs, DEXes, 

1. The DAO Attack of 2016
2. The 2017 Coin Dash ICO Hack
3. The 2017 Parity Multi-Sig Wallet Hack 
4. NiceHash Hack of December 2017
5. BitGrail Hack of Feb 2018
6. MyEtherWallet DNS Hack of April 2018
7. Bithumb Hack of June 2018
8. Bancor Hack of July 2018
9. The 2019 Cryptopia Hack
10. The 2019 Hack of UpBit

The DAO Hack (2016) 

The DAO was a decentralized autonomous organization built on the Ethereum blockchain. In June 2016, a hacker exploited a vulnerability in the smart contract code to siphon off a third of The DAO’s funds, worth around $50 million that day. The hack led to a contentious hard fork of the Ethereum blockchain, creating two separate versions of the network: Ethereum (ETH) and Ethereum Classic (ETC).

Parity Multi-Sig Wallet Hack (2017)

Parity is a popular Ethereum wallet. In July 2017, a hacker exploited a bug in Parity’s multi-signature wallet contract, freezing up to 500,000 ETH, worth approximately $150 million at the time. Unlike the DAO hack, this was not a theft but a freezing of funds. Unfortunately, the wallet contains frozen funds.

CoinDash ICO Hack (2017)

CoinDash is a blockchain-based trading platform. In July 2017, during its initial coin offering (ICO), hackers compromised the platform’s website and replaced the legitimate Ethereum address with a fraudulent one. Investors unknowingly sent their Ether to the hacker’s address, thus resulting in a loss of $7.5 million.

NiceHash Hack (2017)

NiceHash is a mining marketplace where users can rent hash power to mine cryptocurrencies. In December 2017, hackers gained access to NiceHash’s internal systems, stealing approximately 4,700 BTC, worth around $80 million that day.

BitGrail Hack (2018)

BitGrail was an Italian cryptocurrency exchange that specialized in Nano (XRB). In February 2018, hackers exploited a vulnerability in BitGrail’s wallet software, stealing around 17 million XRB, worth approximately $170 million. The crypto exchange had to file for bankruptcy.

Bancor Hack (2018)

Bancor is a decentralized exchange built on the Ethereum blockchain. In July 2018, hackers exploited a vulnerability in a smart contract to steal approximately $23.5 million worth of Ether, BNB, and NPXS tokens.

MyEtherWallet DNS Hack (2018)

MyEtherWallet (MEW) is a popular Ethereum wallet. In April 2018, hackers compromised MEW’s DNS servers, redirecting users to a phishing site. Some users unknowingly entered their private keys and passwords on the fake site, resulting in the loss of $152,000 worth of Ethereum.

Bithumb Hack (2018)

Bithumb is a South Korean cryptocurrency exchange. In June 2018, hackers stole around $31 million worth of cryptocurrencies, including Bitcoin, Ethereum, and Ripple, from Bithumb’s hot wallet. Bithumb promised to reimburse the affected users.

Cryptopia Hack (2019)

Cryptopia was a New Zealand cryptocurrency exchange. In January 2019, hackers got access to the exchange’s hot wallets, stealing approximately $16 million worth of cryptocurrencies, including Ethereum and ERC-20 tokens. The exchange had to go into liquidation without choice.

Upbit Hack (2019)

Upbit is a South Korean cryptocurrency exchange. In November 2019, hackers stole Ethereum estimated to be $49 M from Upbit’s hot wallet. The crypto exchange said it would cover the losses using its funds.

It is worth noting that this list is not exhaustive and there may have been other little hacks or attacks that were not widely reported. Additionally, since the Web3 ecosystem is constantly evolving, there may have been more hacks or attacks that have occurred since 2020.

Hacks in 2020

We’ve seen Web3 hacks since 2016. but what about after 2020? We’re going to look at those now. So, please brace yourself before we look into the list of hacks in 2020. The hacks mentioned are special for a good reason – and you might want to hold on to your breath, dear life and your crypto portfolio – because 2020 had the most number of hacks in the history of Web3 Hacks. 

Don’t believe me? Here’s the list:

1. The Altsbit Hack
2. The IOTA Robbery
3. The bZx Strike
4. The OKEx & Bitfinex Attack
5. The Youtube Scam
6. The UniSwap Loot
7. The DForce Vulnerability
8. The Hegic Exchange Heist
9. The Balancer Transaction
10. The Cashaa Raid
11. The Twitter Scam
12. The Cyberattack
13. The 51% Attack On ETC
14. The Opyn Case
15. The Yam Finance Fiesta
16. The Eterbase Hack
17. The Two-Timer: The second attack on bZx
18. The KuCoin Collective
19. The Yearn Finance Incident
20. The WLEO Collapse
21. Harvest Finance 
22. The Origin Protocol Ruination
23. The Akropolis Strafe
24. The Value DeFi Exploit
25. The Pickle Finance Melee
26. The Compounder Finance Fracas
27. The Flash Attack on Warp Finance

Yup, we’ve had about 27 major hacks just in 2020.

And to be gentle with the listicle, we’ve mentioned only the biggest heists by hackers that occurred. The many little ones ($50 billion or less) are not spoken of to avoid the irking of the underlying fear that creeps in slyly – IS WEB3 A SAFE PLACE FOR DEFI AFTER ALL?

2020 proved to be a rough year for the Web3 economy due to the stolen funds and a loss of capital to restore what was once gone.

Hacks in 2021

Well, DeFi is a great place if security is tight. And yet there are times of vulnerability when someone exploits the bug or a coding mishap. The hacks in 2021 were no less than a spectacle that’ll leave you dumbfounded. The list of major hacks in 2021 is as follows:

1. The Paid Protocol: March, $100mill.
2. Beanstalk Protocol: April, $182 mill.
3. Poly Network Hack: August, $600 mill.
4. Cream Finance: August, $130 mill.
5. Cream Finance: October, $130 mill.
6. Compound Finance: October, $150 mill.
7. Badger DAO Hack: December, $120 mill.
8. Vulcan Forged: December, $140 mill.

February to December saw 8 hacks that ransacked more than $1.5B from multiple parties, have gone with the wind and are unknown till today. So, let’s take a closer look at the top DeFi hacks that happened in 2021:

The Paid Protocol: March, $100mill.

The Paid Protocol Network is a decentralized platform for business transactions. It allows users to transact without interference and ensures secure and efficient transaction processing.

Furthermore, the blockchain protocol is highly customizable and suitable for various industries, including finance, healthcare, and real estate. This protocol governs how transactions occur on the platform, providing standards for all parties involved.

Consequently, smart contracts are an important feature of the Paid Network, as they automate complex agreements. These self-executing contracts reduce the need for human intervention, ensuring prompt delivery of what parties are entitled to.

Moreover, the PAID token powers the protocol and gets employed for access and participation in the platform. Staking tokens earn rewards, governance participation, and premium features. The Paid Network offers tools and services to streamline transactions, such as document management, dispute resolution, and arbitration.

Overall, the Paid Network simplifies business transactions. Its customizable protocol and suite of tools make it ideal for reducing costs and streamlining operations.

Beanstalk Protocol (April, $182 mill.)

In August 2021, the Beanstalk Protocol suffered a loss of around $2.8 million worth of cryptocurrency. The DeFi platform is built on the Binance Smart Chain.

Further, the attacker exploited a vulnerability in the protocol’s code. The error within the code lets them mint fake tokens and swap them for legitimate ones. Thus causing the value of the actual coins to plummet, resulting in significant losses for investors.

Consequently, the Beanstalk Protocol team quickly responded to the hack by shutting down the platform and working to identify and fix the vulnerability. They also announced that they would compensate the affected users for their losses.

Eventually, the incident highlights the importance of security in DeFi protocols and the risks associated with investing in them. Users should carefully research and assess the security measures of any protocol they plan to invest in and take appropriate precautions to secure their assets.

Poly Network Hack (August, $600 mill.)

The Poly Network is a DeFi platform which allows users to swap tokens across different blockchains. In August 2021, the site suffered a loss of cryptocurrency totalling $610 million.

An anonymous cohort exploited a vulnerability in the platform’s smart contracts and fueled it to carry the attack.

The mishap within the contract enabled them to transfer the funds to their wallets.

Being quick on their toes, Poly Network immediately issued a public statement urging the hackers to return the stolen funds. Surprisingly, the hackers complied and gave back most of the funds within a few days, except a small amount that became stablecoins and got transferred to other accounts.

As a result, widespread concern in the DeFi community about the security of autonomous agreements arose. The Poly Network was quick with commendable communication throughout the incident, which helped to minimize the damage and recover the stolen funds.

Further, the incident highlights the need for better security measures and auditing processes for DeFi platforms. As the sector continues to grow and attract more mainstream attention, the Poly Network hack serves as a reminder that while DeFi can offer many benefits, it is still a relatively new and evolving field that requires cautious security and risk management.

Cream Finance (August, $130 mill.)

In August 2021, the DeFi platform Cream Finance lost $29M worth of cryptocurrencies due to a smart contract vulnerability. The attack was by a masked group of hackers who exploited the fact to transfer the funds to their wallets.

Following this, Cream Finance immediately shut down its platform and issued a public statement acknowledging the hack and urging users to refrain from interacting with the blockchain until further notice. The team assured user compensation for any losses incurred due to the hack.

In the aftermath of the attack, Cream Finance announced that it would implement additional security measures, such as more rigorous auditing and testing of its smart contracts and enhancing its bug bounty program to encourage security researchers to identify vulnerabilities in the platform.

The Cream Finance hack is just one of many recent high-profile DeFi hacks that have raised concerns about the security of decentralized systems. The incident serves as a reminder of the importance of strong security measures and risk management in the rapidly evolving DeFi sector.

Despite the negative impact of the hack, Cream Finance’s quick response to the incident, transparency and proactive approach to addressing the issue was commendable. The platform’s commitment to improving its security measures and reimbursement of affected users demonstrates its dedication to maintaining the trust of its community and continuing to innovate in the DeFi space.

Cream Finance (October, $130 mill.)

October saw another attack on the Creamy DeFi protocol. It is not the second time when Cream Finance got bankrupt due to a vulnerability within a code. The first time this happened to Cream Finance was in February, earlier this year. And all the money was gone within an hour. The second was in August, and shortly after, a third hack occurred within a fortnight. The third hack was after the stolen funds from the preceding attack were recovered.

However, the first time, the hacker managed only to loot about $37M worth of different cryptocurrencies. The second hack was in August as mentioned above, and this time the hacker pulled off a whopping $130M right from the platforms’ lending markets.

As soon as the liquidity pool was empty from their Ethereum C.R.E.A.M v1, the platform took control and paused the lending market in Ethereum. The protocol saw through the bug and patched the mishap present.

Eventually, Cream Finance pulled through over a month and recovered some money to give back to the users. The platform thanked the community for their patience and support and was committed to strengthening security with better measures for everyone’s safety.

Compound Finance (October, $150 mill.)

Compound Finance is a DeFi protocol for lending and borrowing. This Ethereum-based protocol quickly gained traction and became one of the most popular DeFi protocols to be.

Unfortunately, the platform took a huge hit in October 2021 when what is suspected to be a bunch of anonymous hackers swamped the system with multiple transactions. The hack resulted in lending vast amounts of COMP, their native token for tiny amounts of collateral in ETH, DAI, & USDC.

Upon analysis, it seemed that the cybercriminals’ ability to loot around $150M was due to a smart contract’s corrupted code. However, it’s unclear whether the transactions of COMP were a mistake and an act of a hack or if the transactions are legitimate.

Badger DAO Hack (December, $120 mill.)

The animal DAO is a DeFi platform that uniquely deals with BTC as collateral across various DeFi apps.

Similar to many DeFi platforms, on 2nd December Badger too fell victim to a malicious code on the Badger DAO website.

Moreover, suspicions arose from the victim’s discord channel since some users noticed a prompt requesting additional permissions while claiming their farming rewards.

However, the hacker could empty various wallets and steal around 2100 BTC and 151 ETH, almost equalling $120M. The DAO came forward to share the unfortunate news on Twitter to raise awareness. 

The Badger took steps to understand how the hack occurred, who the victims were and how it could be stopped from the website. On 3rd December they announced a pause on smart contract functionalities to halt the transactions occurring within the DAO.

Vulcan Forged (December, $140 mill.)

No, it’s not a game. Yet, Vulcan Forged, the Web3 game studio, lost $140M to a masked coder genius.

Vulcan Forged is a Web3 gaming environment that allows players to play and earn. In addition to the main gaming arena, it has features such as a DEX, an NFT Marketplace and a liquidity pool to stake and gains interest for DeFi users.

Moreover, many players of the platform want to quit the platform due to an insecurity of the code exploited by the hacker.

Consequently, the hacker exploited the platform hailing from the Polygon network and got hold of 96 private keys to specific crypto wallets. Thus giving them access to roughly $4.5M worth of native PYR tokens and 9% of the 50M supply.

Finally, the platform found itself $140 M poorer from 96,501 wallets (according to Etherscan). Speculations are the hacker managed to harvest ~$1 M from each wallet by targeting the fattest wallets present on the platform.

With this, gentle 2021 was towards web3 while hacking almost ~2B through a culmination of 10 hacks with a value lesser than or close to $50M.

And ten honourable mentions from reputed finance corps that lost close to a 50M are:

1. February: Cream Finance – $37 M
2. March: Meerkat Finance – $31 M
3. April: Uranium Finance: $50 M
4. April: EasyFi: $59 M
5. May: Pancake Bunny: $45 M
6. May: Belt Finance: $50 M
7. June: Venus, ~$50 M
8. September: Vee Finance – $35 M
9. November: bZx: $50 M
10. December: Grim Finance – $30 M

Hacks in 2022

It is important to note that the Web3 ecosystem is constantly evolving, and there may have been other hacks or attacks that have occurred since these incidents:

1. Wormhole: $326 mill, Jan 2022
2. Ronin Wallet: $552 mill, March 2022
3. Elrond L1 Hack: $113mil, June 2022
4. Nomad: $190 mill, Aug 2022
5. Wintermute: $160mill., Sept 2022
6. Binance (Binance Smart Chain): $566 mill, Oct 2022
7. FTX: $477 mill, Nov 2022 

I know it gets a little overwhelming to read about hacks, but the year 2022 had very different means of hacking. Let’s see how the hacks in 2022 took place: 

Wormhole Hack

$326 mill, Jan 2022

2022 had just started, and the hackers decided to make some money to grow rich. They exploited a deprecated, insecure function to bypass signature verification and stole $326 million (~120k wETH).

Wormhole is a protocol in web3 that aids cross-chain transactions. The hacker took advantage of the code and exploited the blockchain program to lose all its funds. Shortly after the attack, the platform released a statement on Twitter that the platform’s security got breached.

Consequently, the hack on Feb 02 2022, saw a loss of 120k wETH tokens and was taken within a short time. Moreover, there was no collateral for the money taken from the vaults.

Further, there is a theory that the hack occurred a few hours before the code got fixed. This makes one ponder the following, “Is it an inside job?”, “How did the hacker know about the code glitch and the vulnerability of the platform?” 

Is it possible for the platform to have a snitch to provide information and get a part of the loot?

Nonetheless, the platform came forward to reward the looter with $10 M prize money. A year later, Oasis and Jump Crypto (the father company of the bridging platform) came together and worked on recovering the wallet addresses from where the funds got stolen.

Following this, the hacker creates a third-party wallet. This third-party wallet contains funds recovered from the hack. What they didn’t expect was a counterfeit attack from the attacker. The hacker had initiated a stop-loss code.

Eventually, the collaboration between Oasis and Jump Crypto restored and secured most of the funds from the hacker.

Ronin Wallet

$552 mill, March 2022

A couple of weeks later, after the Wormhole came to an attack on the Ronin Wallet. I don’t think the platform expected a grand showdown between the hacker and the platform, yet the hacker danced his way through to the wallet’s private keys.

You see, the Ronin wallet isn’t unsafe. The wallet is so secure that the hack did not catch attention for almost six days post-attack. This fact came to light when a user couldn’t withdraw 5k ETH from the bridge.

In March 2022, this became one of the biggest DeFi hacks Web3 had seen. However, the hack consisted of compromised private keys. 

The hacker gained control of 4 out of 9 validator nodes by using the private keys. Further, speculation goes around that the hacker gained control of nodes from Sky Mavis and a third-party Axie DAO validator node which signed the transactions.

Consequently, with access to 5 different signatures (nodes), the hacker initiated a transfer worth 173.600 ETH and 25.5M USDC from the Ronin bridge contract.

Elrond L1 Hack

$113mill. June 2022

The Elrond blockchain on the Maiar DEX was plunged into $113M worth of Elrond eGold (EGLD).

Sequentially, the Elrond L1 blockchain got hacked for $1.6M worth of tokens and dumped on the market. This resulted in a massive downfall of market value by 95%!

Following the attack, the Wu Blockchain took to Twitter to warn and inform everyone about the fraud that occurred at their end.

Speculations are that three addresses were simultaneously created and received funding from the BSC DEX. The hackers deployed a smart contract with a ‘deploy’ function to deploy after the funds were in their accounts.

What startled the developers was, ‘How did 1 smart contract manage to transfer huge amounts of money?’

However, the case and cause, the CEO of the blockchain (Beniamin Mincu) stated that they were investigating malicious activities occurring in the Maiar DEX. A short period after reporting, the DEX got attacked. The blockchain halted all operations until the blockchain was fit to resume. They managed to make the DEX go live.

Further, a blockchain researcher, fondly known as ‘Foudres’, stated about a hack within the network as soon as the price went down by 95%.

In addition, the three wallets contained various amounts of EGLD in a combination of 800,000 EGLD, 450,000 EGLD, and 400,00 EGLD. Upon further investigation, the 800,000 EGLD [close to $54 M] was sold by the hacker.

Nomad

$190 mill, Aug 2022

Nomad, similar to Wormhole, is a crypto bridge. It links different blockchains together for cross-network functionalities. A security breach within the platform code led to a loss of $190 M in the first week of August. The platform offered a bounty of 10% of the funds returned to counter the attacker.

Furthermore, the bug present within the security code was effortless to crack. The bug was such that one could enter a value and withdraw the funds, even if there weren’t enough in the assets present.

The blockchain has regained more than $20M of the loss. In addition to that, Elliptic, a blockchain analysis company stated that the Nomad attack is the biggest DeFi attack Web3 has seen to date. They also said that the hack consisted of a team of 40+ hackers. And amongst the 40+ hackers, one hacker stole around $42 M for themselves.

Now, we have got to consider, ‘Why Bridging Protocols?’ Why are they being attacked more frequently? The answer is simple: It’s got funds. Lots of funds, in abundance and of different values. It’s an easy target for many hackers who want fast money.

Wintermute

$160mill., Sept 2022

Wintermute is a DeFi protocol that helps bridge between networks, provides liquidity, and provides a crypto exchange space.

This wonderful DeFi network is known for its custom web3 wallet addresses from Profanity. Unfortunately, the fancy address maker protocol had a bug that got exploited.

DID YOU KNOW: Wintermule provides liquidity on over 50+ exchanges and platforms.

Consequently, the hacker created and funded a custom wallet from the admin vault. Knowing that Profanity has a bug, the hacker decided to take advantage of the same and stole around $160M by stealing more than 20M OP tokens and various cryptocurrencies worth $118.4M.

The other funds looted amounted to 671 WBTC (~13 M) and 6,928 ETH ($9.4M). 

Eventually, three hours post-loot, the CEO of Wintermute released a statement on Twitter. The company also convinced the viewers that the CeFi and OTC services were not affected during the hack.

Furthermore, deductions roam around that the compromise of multiple private keys of wallets led to the event. But let’s be aware that the smart contract functions were just fine, and the hacker managed to carry out the heist by funding their wallet with their own ETH.

Binance (Binance Smart Chain)

$566 mill, Oct 2022

Halt. That’s what the Binance Smart Chain did when it faced an exploit. The sudden halt of transactions on the BSC led everyone to be alert. Giving a quick response to the attack the platform issued a notice on its Reddit and Twitter accounts.

The fiasco happened in the cross-chain bridge, BSC Token Hub. 

“Software code is never bug-free” – CEO, Binance.

The CEO of Binance, Changpeng Zhao stated that no funds were stolen from the users’ wallets/ accounts, but also told the reporters that the cross-chain vulnerabilities are more prone to hacks.

So, if the users’ funds weren’t stolen where would the hacker get the money from? Well, it seems that the hacker had generated their BNB tokens from the platform and took it to their address.

Eventually, the hacker could transfer about 1,000,000 BNB to their wallet by making two transactions. Since the decentralized network cannot stop completely, they halted operations in some nodes and figured out through which nodes the capital was flowing. Soon, they were able to control and minimize the loss. 

FTX

$477 mill, Nov 2022

FTX is a DeFi exchange that gained traction and yet performed well within the market, while competing with other exchanges such as Binance, Arbitrum, and Optimism.

A move to sell all the FTT tokens on the BNB. There were ~23M FTT tokens culminating in an amount of $530M. Following the mishap, Changpeng ‘CZ’ Zhao said the decision to liquidate the exchanges FTT was to manage any risk it may possess right after the collapse of LUNA. Consequently, FTX was facing a liquidity crisis like never before.

The value of an FTT token fell steeply and gravely, by 80% within 48 hours. To counter the crisis, Binance came forward to help FTX by buying the non-US business of FTX – the world’s largest cryptocurrency platform to aid its closest rival.

Turning down the offer, the FTT token platform suffered a major loss.

Turning down the offer, the FTT token platform suffered a major loss. Resulting of cancelling the deal with BNB, the FTX platform saw a freeze in accounts and assets. Some of the implications of the FTX were as follows:

• Bankman-Fried had quoted $8M for the exchange
• The California Department of Financial Protection and Innovation started an investigation into FTX
• Bankman-Fried stepped down as a CEO.
• FTX filed for Chapter 11 bankruptcy
• Unauthorized transactions took place
• A lawsuit against FTX was filed
• Bahamas took control of FTX Digital Assets

Eventually, the charges against Bankman-Fried led to the arrest of the person mentioned by the Bahamian authorities. At the time of writing, former CEO Sam Bankman-Fried pleaded not guilty to criminal charges and allegations on Jan 3rd. His next trial date of October 2nd will let us know what happens next to Bankman-Fried and FTX.

Summary

So, that’s about 60+ web3 hacks in 100+ months, from 2016 to 2022. And it’s not that Web3 is not safe, it just isn’t completely safe yet and volatile nature of cryptocurrency leads to fall and rise of market shares in a second. Code vulnerabilities, compromised keys, and scams are ways hackers employ to steal. This reminds us that we must be vigilant with our information and must give Web3 a chance to grow to its fullest potential.

Try to understand why and how blockchain can be susceptible to various web3 hacks and how to stop them.

The post Web3 Hacks: The Biggest and Prominent Web3 Hacks Since 2016 appeared first on InnovaRise.

The internet has come a long way since its inception, with Web 2.0 giving us a more interactive and collaborative version of the web. Web2 enables users to create and share content. However, Web3 is gaining traction, which promises to revolutionize the internet again. 

Web 3.0 is the next generation of the web with a more decentralized, secure, and trustless network.

One of the significant advantages of the decentral web is the focus on security. The DLT ensures the privacy and security of users’ data with the help of encryptions and smart contracts. While encrypting secure messaging, smart contracts help execute transactions without the interference of intermediaries. Reducing middlemen, thus reducing the risk of fraudulent activities.

However, despite the promise of increased security, Web3 is not immune to exploitation. As with any new technology, hackers are always looking for vulnerabilities to exploit, and Web 3.0 is no exception. 

In this blog post, we will explore Web 3.0, its security features, and the chances/reasons for exploitation. And a surprising listicle in the end!

On Web3

Web3 is the next version of the internet that aims to have a more open, safe, and transparent network. A critical component of Web3 is Digital Ledger Technology. It provides a secure and easy method to store and transfer data.

A blockchain is a distributed digital ledger of transactions that is present across networks. Each block in the chain is secure with encryption. All blocks contain a hash, a unique code that identifies the block and the data it contains. Once a block is on the chain, altering or deleting the information is inevitable. This technology thus provides a tamper-proof way to store and transfer data.

Read More: On Smart Contracts

The use of blockchain technology in Web3 provides a more secure and transparent way to store and transfer data, reducing the risk of fraud and increasing trust among users. With Web3 and blockchain technology, individuals can take control of their data and participate in a decentralized network, promoting greater privacy, security, and autonomy.

On Encryption and Its Types in Blockchain Tech

Encryption is the process of converting plain text or data into a cipher or code, making it unreadable to anyone who does not have the key or password to decrypt it. It is a crucial aspect of blockchain technology, where data privacy and security are of prime importance. 

Encryption ensures that only authorized individuals can access sensitive information and prevents it from getting intercepted or stolen. There are different types of encryption in blockchain technology, each serving a specific purpose.

Firstly, we have symmetric encryption. An encryption type that uses one key for encryption and decryption. It is a fast and efficient method, but the key needs to be securely accessible between the sender and receiver.

The second type is asymmetric encryption, which uses two keys, a public key and a private key. The public key is visible to others, while the private key is secure with the owner. Data encrypted with the public key can only be decrypted with the private key, providing a more secure method.

Lastly, we have an encryption type known as hashing. Hashing is a process where data transforms into a fixed-length string of characters. The firm encryption makes it impossible to reverse and retrieve the original data. Hashing commonly secures passwords and verifies data integrity.

But if cryptography can solve problems, wouldn’t it provide a strong firewall against hacks and exploitations of code?

On Reasons Why Hacks Occur in Web3

It is not necessarily “easy” to hack in Web3. As the decentralized and secure nature of the network provides significant advantages over traditional centralized systems, the security systems are pretty rigid. However, there are still some potential vulnerabilities that hackers exploit. Here are a few reasons why Web3 could be vulnerable to hacking:

Smart Contract Vulnerabilities

Smart contracts are autonomous agreements that the digital ledger preserves. If there are errors or vulnerabilities in the code, attackers will exploit it to steal data or funds.

Private Key Management

Private keys enable access and control data on the blockchain. If private keys are not secure, hackers can steal them to their benefit.

Lack of Regulation

Web3 is still a relatively new technology, and there are no clear regulations governing its use currently. This lack of regulation could make it easier for hackers to operate undetected.

Social Engineering

As with any network, Web3 is susceptible to social engineering attacks, such as phishing or pretexting, where hackers trick individuals into revealing sensitive information or providing access to their accounts.

Centralized Points of Failure

While Web3 is decentralized, there are still centralized points of failure, such as exchanges or wallets, that could be vulnerable to hacking attacks.

It is important to note that Web3 may have some potential vulnerabilities. These risks reduce with proper security measures, such as secure coding practices, private key management, and robust authentication protocols.

Types of Attacks That Can Occur in Blockchain Tech

Web3 refers to the third generation of the internet. A version of the web that focuses on decentralization, transparency, and employing blockchain technology. As with any technology, Web3 is not immune to hacks and security breaches. Here are some of the different types of hacks that can occur in Web3:

Smart Contract Vulnerabilities

Smart contracts are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. However, if the code is incorrect or contains a vulnerability, hackers may exploit the broken code. Some common smart contract vulnerabilities include reentrancy, integer overflow/underflow, and denial-of-service (DoS) attacks.

Phishing and Social Engineering

Phishing attacks are a common tactic hackers use to steal sensitive information, such as passwords or private keys. In Web3, phishing attacks can take many forms, including fake websites or social media accounts that impersonate legitimate projects or individuals.

Wallet Vulnerabilities

Web3 wallets store and manage cryptocurrencies, but if a wallet is unsafe, it can be vulnerable to hacks. Some common wallet vulnerabilities include weak passwords, private keys stored on a device that is easily accessible, or malicious browser extensions that can steal private keys.

51% Attack

A 51% attack occurs when a single entity controls more than 50% of the network’s computing power, allowing them to manipulate the blockchain. This can lead to double-spending attacks or even the rewriting of the transaction history.

DDoS Attacks

Distributed denial-of-service (DDoS) attacks involve flooding a network or server with traffic to overwhelm it and cause it to crash. This can disrupt Web3 services and prevent users from accessing their wallets or transacting on the blockchain.

Supply Chain Attacks

Supply chain attacks involve exploiting vulnerabilities in third-party software or hardware to gain unauthorized access to a system. In Web3, this can include compromising hardware wallets or other devices used to store private keys.

Bugs

Bugs in smart contracts can lead to security vulnerabilities, which hackers can exploit to steal funds or disrupt operations. For example, a bug in The DAO smart contract in 2016 allowed an attacker to drain over $50 million worth of Ether from the contract.

Scams

Scams are a common tactic hackers use in Web3. These have many forms, such as fake ICOs or phishing websites, and are easy to trick users into sending funds to the attacker’s address. In some cases, scams can even involve the creation of fake tokens or projects with no value.

Reentrancy

Reentrancy is a specific type of smart contract vulnerability that occurs when an attacker can repeatedly call a function within the same transaction. This allows them to manipulate the contract’s state and steal funds. The most well-known example is the 2016 DAO attack, which exploited a reentrancy vulnerability to drain millions of dollars from the agreement.

It’s important to note that new types of hacks and security breaches are constantly emerging as Web3 technology evolves. As such, individuals and companies involved in Web3 need to stay vigilant and take appropriate measures to secure their systems and assets.

THE MOST PROMINENT HACKS OCCURED ON WEB3

Web3 is secure with encryptions, hashes, and keys to protect many vulnerable parts of the internet. And yet these hacks occur due to various reasons.

So, with almost a decade since Ethereum released and 7 years since the DAO attack in 2016, here’s a listicle of the prominent hacks we have in web3:

1. The DAO Attack, 2016
2. The Parity MultiSig Hack, 2017
3. The BitGrail Hack, 2017
4. The UpBit Hack, 2019
5. The Harvest Finance Attack, 2020
6. The Beanstalk Attack, 2021
7. The Poly Network Attack, 2021
8. The Compound Finance Fiesta, 2021
9. The Vulcan Forged Fiasco, 2021
10. The Wormhole Hack, 2022
11. The Binance Smart Chain  (BSC) Hack , 2022
12. Euler Finance, March 2023
13. Next? 

DeFi hacks have had an immense impact on the DeFi economy. The first hack being the DAO Attack in 2016 shook everyone – Especially Ethereum.

And how is a 1.5 yr old Ethereum supposed to know it would be vulnerable and taken advantage of?

That was when everyone got a boon and a bane. The lesson is that Web3 is susceptible to code vulnerabilities and information copied to the dark web where hackers took advantage time and time again.

SOME LESSER KNOWN HACKS IN WEB3

Thank you for reading so far! And as a bonus, here are a list of web3 hacks that you have never heard about before:

1. Coindash ICO Hack, 2017, $7.5 M
2. Bancor Hack, 2018, $23.5 M
3. The Cryptopia Hack, 2019, $16 M
4. Cashaa Hack, 2020, $3.1 M
5. Etherbase, 2020, $5.4 M
6. Origin Protocol, 2020, $7 M
7. Warp Finance, 2020, $7.7 M
8. Cream Finance, 2021, $37 M
9. Vee Finance, 2021, $35 M
10. Inverse Finance, 2022, 1 M

One must come to realize how unheard of most of these DeFi applications are. And how so much money is lost in such transactions is a question one can ponder.

Web3 is safe, maybe, just not completely safe yet. Because, if you see closely, Web3 started only a few years/ a decade ago and has a long way to go. 

We’ve given time to the internet to do its thing and become awesome for the last 3 decades, why not wait 1 more, maybe then Metaverse and Blockchain may actually function better with respect to security,  finance management and global decentralization.

The post Web3 Hacks: Understanding Safety in Blockchain Technology appeared first on InnovaRise.