30s Summary

Eric Waisanen, of Astrovault, discusses the importance of security for decentralized exchanges (DEXs), emphasizing that strong measures are necessary to protect valuable assets amidst frequent cyberattacks. Despite the appeal of DEXs’ anonymity and independence from central oversight, this freedom is identified as potentially threatening to their security. Instances of high-profile breaches, and new hacking methods (like “sandwich attacks”), underscore the need for continuous updating and enhancing of security systems. Waisanen urges developers to evaluate protocols comprehensively and customise all aspects of security to ensure a safer environment and retain user trust.

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Hey folks, Eric Waisanen, boss man at Astrovault here.

No one’s a big fan of the annoying two-factor authentication (2FA). It’s a pain, but it’s a necessary evil to keep our online stuff secure. But let’s make something clear – just having 2FA or other security measures isn’t enough to protect our data. Staying safe online means continually looking out for threats and adapting to new tech. This holds especially true for decentralized exchanges (DEXs) where there’s no central oversight and loads of valuable assets. So, for anyone developing DEXs, if security isn’t your number one, it’s time to think again, buddy.

Now, let’s chat about DEXs for a bit. What’s cool about them is that they give users complete control of their assets without needing any personal identification. Meaning you can manage your keys, do transactions without middlemen while still owning your funds. But this freedom can be a double-edged sword when it comes to security.

DEXs are no strangers to major cyberattacks. Just in the first three months of 2024 alone, more than $336 million in digital assets were stolen from DeFi platforms. The DEX hacking game has also stepped up. Remember Jaredfromsubway, the infamous maximal extractable value (MEX) bot? Well, it’s back with some fresh ways to hack, like adding and removing liquidity from DEX pools in what’s known as a “sandwich” attack. You might wonder, what have sandwiches got to do with DEXs? Well, in DEXs, a sandwich attack is a sneaky way of gaming the system by placing yourself between two transactions of a target asset to make profitable trades.

These types of attacks have helped the bot stack up millions of big ones in Ether (ETH) and have pointed out the ever-changing risks in decentralized exchanges. Now, security checks were once a reliable way to secure exchanges and reassure users. But as it turns out, high-profile breaches can also happen on platforms that were previously deemed safe.

It’s been eight years since the first DEX was introduced, and it’s high time we ramped up our defenses if we want users to feel safe in managing their assets.

If you’re a DEX developer, nothing stings more than seeing your hard work unravel due to a security issue. The exciting new feature or tool can turn into a disaster if user investments are at risk and every update creates a breach for the baddies. The simpler and user-friendly a DEX system appears, the more effort was made to secure it. So, evaluating a protocol’s technical and economic facets are key to spotting potential weaknesses and making sure the system is up to par.

DEX developers need to go beyond just the basics when it comes to security, or they might need to rethink their approach. Developers can boost their security strategy by allowing all aspects, even those that seem insignificant at first, to be customizable. Sure, it might complicate things a little down the line, but it ensures a safer environment which is the main goal.

A DEX’s dreams of making it big will be short-lived if it doesn’t protect its users. Despite being decentralized and encouraging open access, DEX platforms owe it to their users to institute robust security measures. As DEXs continue to pull in more participants into the DeFi space, balancing groundbreaking technologies while keeping users safe is crucial.
I’ve been in the Web3 space since 2017. Just a heads up – this article is for general info only and shouldn’t be taken as legal or investment advice. Just my two cents here and doesn’t necessarily reflect Cointelegraph’s views.