The web3 sector encountered a significant blow, losing $1.8 billion in 2024, as reported by Hacken’s Q3 Security Report. A considerable portion of these losses, nearly 40%, were due to issues that could have been averted, such as smart contract flaws and reentrancy attacks. A startling revelation was that 90% of the compromised projects had not undergone any form of security audit, underscoring a glaring gap in their security measures.
While traditional security audits play a crucial role in safeguarding user assets by providing thorough evaluations at pivotal moments of a project’s development, their centralized nature often leaves their conclusions unchallenged. The expectation that a singular audit can uncover all potential vulnerabilities is impractical, given the human propensity for oversight.
The ethos of decentralization that underpins web3 suggests a solution to this conundrum. By involving the broader community of white-hat hackers in public audits, and incentivizing their participation through DeFi mechanisms, the security of the entire web3 landscape could be significantly enhanced. This model could also extend the reach of bug bounties to smaller projects by making them more economically feasible.
Decentralizing Security Audits: A Win-Win for the Web3 Community
The challenge lies in motivating independent auditors without imposing additional financial burdens on projects. One viable strategy involves leveraging DeFi innovations to create reward pools funded through smart contracts, to which both the auditing firm and its token holders contribute. Following an initial audit by the firm, the wider community is invited to scrutinize the code, with rewards distributed from the pool upon completion.
Hacken’s DualDefense Flash Pools exemplify this model, offering projects a comprehensive security solution that combines private and public audits. This not only incentivizes community engagement through staking rewards but also enhances the security assurance of project codes, benefiting the broader web3 ecosystem by bolstering its defenses against cyber threats.
This model democratizes security access for emerging web3 projects, which might lack the means for traditional bug bounty programs. By establishing a fixed, community-supported reward pool, it offers a predictable and accessible security framework from the start.
However, this approach does expose auditing firms to new risks, particularly regarding their reputation. Allowing external verification of their work means that these firms must exercise even greater diligence, knowing the public scrutiny their audits will undergo. Yet, this transparency could drive a higher standard of accountability and precision, ultimately serving the industry’s best interests.
Moreover, public audit pools introduce a novel concept in DeFi: rewards underpinned by actual financial activity rather than inflationary token schemes. This shift promises a more sustainable growth model for DeFi, grounded in real-world value creation.
By marrying traditional audit practices with community-driven audits, a new, resilient security paradigm emerges, suitable for web3 projects of any size. Public audits, fueled by DeFi incentives, represent a progressive step towards fostering a secure, inclusive, and proactive web3 security culture.
