According to a report, cryptocurrency holders and investors in general, particularly those in Decentralised finance (DeFi), are more vulnerable to hacking. This week’s attack on Poly Network has only highlighted this issue more. Cybercriminals regularly exploit smart contract flaws.Countermeasures currently employed as security procedures are, however, not infallible. Decentralized insurance, on the other hand, can provide a guaranteed fail-safe.
Security on any decentralized network is always a priority. This is because censorship resistance has a huge appeal to users. Although recently, smart contract hacks have started to occur at an alarming rate within DeFi. This situation presents a difficulty for participants in light of its growth in the ecosystem.
In fact, this surge within the DeFi ecosystem has necessitated a desperate search for better security measures as the staked value increases. No matter how fail-proof any software may seem, hackers are extremely well motivated to find exploits. The nascent nature of the crypto market has created the challenge of having impregnable computer programs. The need to evolve quickly has accompanied this situation.These are particularly true for smart contracts. Achieving a flawless protocol is challenging because of the numerous operating systems and programming languages available today. It is more a matter of reducing the possibility of an exploit than total elimination.
Meanwhile, DeFi continues to enjoy a tremendous surge in the number of willing participants, as indicated by the total value locked. This development has further incentivized the process of exploiting the crypto space. In any case, it is safe to say that investors might begin to clamor for more safety very soon.
Securing smart contracts
In a bid to guarantee the soundness of smart contracts, certain practices have been adopted within the DeFi ecosphere. Among the methods used in the creation of safe programmable contracts, the leaders have beenbug bounties, audits, and insurance. Although these procedures have been somewhat successful, they have varying degrees of success. We will explore them here.
- Bug Bounties
Within the crypto ecosystem, bug schemes are becoming increasingly popular. Project developers use them to detect security flaws in smart contracts. Once these deficiencies are identified, they are fixed to prevent malicious individuals from exploiting them. They are viewed as a supplementary security measure by protocol owners to be used in conjunction with other proactive security efforts. The creators rely on the random possibility that white hackers will be attracted enough to check the smart contract. This is because they are left with limited options to double- check the safety of their software.
Before deploying the application, the most critical task for programmers is to write secure codes and limit flaws. Even the most meticulous coders will inevitably miss errors, some of which may constitute a security concern.
- Smart contract audits
This process evaluates the algorithm that underpins the smart contract’s code. Before implementing the smart contract, programmers can use the audit analysis to identify potential vulnerabilities.These checks are usually carried out by third-party cyber security professionals who provide a report to the project developers. If there are weaknesses, recommendations on possible fixes are made.The evaluations typically include running tests and manual code analysis. These tests are difficult to conduct because smart contracts frequently interact with one another. Also, any connection to third-party systems can expose the protocol to vulnerabilities.In the booming DeFi business, where bug-filled smart contracts are frequently rushed out to suit investor’s demand, smart code audits arebecoming increasingly critical. Development teams are eager to obtain an audit to gain user confidence and boost the project’s credibility.Despite the best efforts of these measures, DeFi protocols still appear to be lacking the desired level of security.
In 2020 alone, hackers stole over$120 million via the exploitation of smart contract bugs. In 2021 as well, a good number of smart contract hacks have occurred, already totalling well over $800 million. A popular case is the Chainswap hack where a hacker stole $8 million worth of digital assets. New tokens were minted and moved to a Binance smart chain address from where it was sold.
Insurance remains the best safety measure for DeFi platforms. They attack security issues with a hybrid approach and cover for future uncertainties. Following the risk assessment of protocols, the third-part insurance protocols spread the risk amongst many protocols, and provide cover from underwriting liquidity pools provided by miners who are rewarded generously for their stakes. This separates the risk from the protocol whereas audits and bug bounties may still be fallible. This is the only way investors are able to guarantee protection of their assets.
InsuArce.io offers the best approach to DeFi insurance by combining the various safety practices within crypto space.
InsurAce.io security management approach
InsurAce.io is a well-known decentralized multi-chain insurance protocol. It offers DeFi customers dependable, robust, and secure insurance services. This allows them to protect their investment assets against a wide range of risks. Users can protect their assets for up to 60% less than other insurance protocols that would cover possible risks such as smart contract vulnerabilities.
As a security-focussed protocol, itself having been audited by PeckShield and SlowMist auditors, InsurAce.io is determined to offer the kind of protection that will facilitate large institutions to enter the DeFi ecosystem safely.
By performing high-quality risk assessments on protocols combined with unique security algorithms, InsurAce.io is able to offer competitive premium prices to its users to protect their assets on listed protocols.
For example, one of the most popular protocols listed on the InsurAce dApp is Anchor Protocol. Terra users of the Anchor Protocol generate a fixed stable coin return of around 18% per year, which they can protect with the InsurAce.io app for 2.5%. That generates a guaranteed 15.5% fixed, protected return, which in the current market is incredible.
Furthermore this can all be achieved without the need for KYC
InsurAce.io has seen growing adoption from within DeFi in the relatively short period it has been in existence. Launching on Ethereum and later deploying on the Binance Smart Chain, building their own bridge between the two in the process.
Protocols on other chains can also be covered via the InsurAce.io app, to date there are over 55 protocols and their users protected. Not bad for a project launched three months ago. But with a strong team and very influential DeFi backers it comes as no surprise.
DeFi Insurance will become the standard method for mitigating smart contract risks. Soon, protocols will start automatically integrating insurance protocols like InsurAce.io with 1-click insurance offerings like buying travel insurance for a flight, or even 0-click insurance where the potential yields achievable through a particular protocol are kept slightly lower as a portion of the rewards are automatically sent to the insurance protocol to pay for the cover and guarantee the assets.
DeFi platforms are becoming more lucrative for hackers for varying reasons. The increased amount of money seen in the space and lack of regulations for one. Also, the hasty nature of protocol deployment and inadequate funds to have a security department have led to this interest.
Despite the increasing risk, InsurAce.io can provide a one size fits all solution to this issue. Its greater adoption will increase the level of security within DeFi.