Web3’s biggest security threat is a familiar monster — centralization 

Not only are we quite centralized, but the degree to which this centralization is hidden makes it impossible to remain secure


Artwork by Crystal Le


In cryptography, there is a saying that “every secret creates a potential point of failure.” 

For simplicity, this means that what you hide, like a password, is a target for theft — but so is where you hide it. To stay secure, you have to think about what you are protecting and how you are protecting it.

And what brought many of us to blockchain — especially cryptographers and developers — was the ease with which this problem could be solved. We had spent our careers building system after system to mitigate the centralized points of failure. Now, we could work with proactive security measures, go beyond handling reactive security crises, and create systems that work for every user.

A security element of blockchain not highlighted enough is how it protects the “typical” user, not just the perfect user. Perfect users change passwords every 28 days and remember to use a VPN for airport Wi-Fi; typical users use the same password for their social media and bank accounts. Typical users are not lazy — they are just not as familiar with best security practices or do not have the time to manage them.

Decentralization protects the typical user by default. 

If a dapp was built on an established and secure blockchain, they could trust it would continue running as long as the chain published blocks and the smart contracts were valid. If they download a self-custodial wallet, they can trust that the ability to use the funds contained within it is only available to them as long as they keep their key private. Decentralization was the feature to look for when using a crypto or blockchain dapp or platform, and it was easy enough to vet.

I use the past tense here because our security, as a sector, has severely regressed. Not only are we quite centralized, but the degree to which this centralization is hidden makes it impossible for even a perfect user to remain secure. These points of centralization are new and intentionally built by some companies that desire ownership and control. They represent the biggest security threat to digital assets that nobody is talking about.

If you do not believe me, consider this: Today, a single protocol owned entirely by a private company is the linchpin for how millions of wallets and their blockchains communicate. Today, employees working for layer-2 blockchains can stop a chain from processing blocks by simply pausing their sequencers. Today, millions of dollars of DAO treasuries can be spent without a single community vote. 

Read more from our opinion section: Crypto crime is too easy

These are the kind of designs that make the infamous rollback of “The DAO” look trivial in comparison. More seriously, these vulnerabilities represent the kind of centralization we joined Web3 to dismantle. And they are being built on purpose.

Worst of all, the responsibility remains on the users’ shoulders to do their own research. The argument is they can simply stop using any dapp or chain that doesn’t meet their personal threshold for decentralization and risk. But this is not easy to do either. In what seems to be a trend of “informed centralization,” this information is stored away in terms and conditions or restricted as proprietary information. How does this environment serve any user, much less a “typical one?” It does not.  

To move Web3 forward, we must quickly adopt best practices that keep more than just our users accountable for risk. Our accountability must be public and verifiable by design. We could start by open-sourcing critical infrastructure so no single company or entity can control it, by pushing for a governance standard where activities like block “pauses” and treasury spends are recorded (if not executed completely) onchain, and by rediscovering a tradition of calling out bad behavior by naming the perpetrators of centralization, not its victims.

During a security crisis, it is the tendency of all users (even the perfect ones) to find a scapegoat and pin the failure on them. Our sector is no different. 

While our tradition of personal responsibility (“not your keys, not your crypto”) is admirable, it is not a fair standard to hold all our users to, nor does it adequately protect any of us. We were all typical users once — if we want a billion more of them to join us anytime soon, we must take action.

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.


Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research Report Templates.png


ZKPs enable efficient offchain transaction processing and validation, resulting in increased throughput and reduced fees. Solana's ZK Compression leverages ZKPs to minimize onchain storage costs, while Sui's zkLogin streamlines user onboarding by replacing complex key management with familiar OAuth credentials.


North Korea suspected in breach of Indian exchange’s multisig wallet


Plus, Sanctum’s CLOUD token has officially launched — but not without problems


It’s not yet clear whether Donald Trump is pumping bitcoin. But an unofficial memecoin is still seeing benefit.


StarkWare takes a step towards making StarkNet for Bitcoin


The numbers point to one conclusion: Risk is back, or at least it was during the first half of the year