Decentralized finance has unfortunately acquired a reputation for offering scammers opportunities to defraud investors. Pump and dump schemes, rug pulls, and honeypots have occurred so often that users are highly wary of new projects that list ambitious goals.
While much has been written about ways DeFi users can avoid falling victim to scams, DeFi projects have been left to fend for themselves. Project developers and owners face the same risks as users, and a phishing attack can cripple a project and erode user trust.
Despite DeFi’s advanced technological stance, it remains vulnerable to phishing, one of the oldest ways of perpetrating a security breach. Here’s how DeFi projects can insulate themselves from a phishing attack.
Educate Teams
DeFi project teams are highly technical, but this ability doesn’t immunize them from a phishing attack. Impersonation attacks are very common these days. A malicious actor might pose as a trusted source and entice a team member into divulging sensitive information.
Even worse, a malicious actor might pose as a team member and exploit project code for vulnerabilities. DeFi’s open-source nature makes finding vulnerabilities relatively easy compared to commercial projects and this means project developers need to be even more cautious of what enters their inboxes.
One of the best ways to educate team members is to give them access to a security simulation platform. These platforms tailor cybersecurity learning paths to individual abilities, giving everyone the chance to boost their security skills. Most developers are not well-versed in security, and a simulator gives them the chance to validate their skills and benchmark them against the rest of the team.
At first glance, implementing this process might seem challenging. After all, DeFi projects work as independent cells, with team members spread remotely. Unlike corporate organizations, DeFi projects are not bound by traditional rules or corporate structures. Using project aims as motivation to take phishing seriously is critical.
Remember that phishing doesn’t involve just mailboxes. A malicious actor can spoof credentials and infiltrate a Telegram or Discord community and cause untold damage to a project’s reputation. Education is the first step and mitigates several phishing risks.
Communicate with Users
DeFi projects regularly communicate with their users and are aware of the most prolific channels to engage their community. However, most projects make the mistake of using these channels for PR and neglect educating users on security principles.
While PR boosts user numbers, security-oriented communication preserves community engagement. After all, there’s no point in increasing community numbers if a project cannot protect its users adequately. For starters, DeFi projects must DeFine what kinds of communication they’ll engage their users with.
For example, what will PR announcements look like? What will bonus token listing offers look like? What information will the project collect? DeFi users are sensitive to divulging personal information, and this protects them from common phishing scams.
However, DeFi hackers are a sophisticated bunch. They can steal keys and other sensitive information and vanish without a trace. If the attacker spoofs project communication, most users will likely lose trust in it despite the project not being at fault.
To prevent this situation, projects must identify what information their missives will contain and what information they’ll collect, if any. Including links to the project’s social media accounts is also a good move. For example, project admins can use Twitter to instantly let users know of any potential risks or scammers impersonating the project.
Adopt Security as a Feature
DeFi projects take security seriously but don’t always communicate this commitment well to their users. An environment of security seeps throughout the community, and insulates it from common phishing attempts. For example, a well-monitored and moderated community will quickly recognize an account spoofing a popular one.
Most DeFi communities talk about prioritizing user security but do not demonstrate it. For instance, their newsletters talk about testing project functionality intensely but do not demonstrate what work is being done by developers to reduce security risks. Often, projects hid such communication for fear of users thinking the platform’s functionality is flawed.
However, this approach is incorrect. DeFi’s premise is transparency, and by doing the opposite, projects are shooting themselves in the foot. Worse, communications like these incentivize developers to push security aside and prioritize fast development. The result is a project that relies solely on bug bounty collectors to protect its users.
The right way to approach security in DeFi is to adopt processes that eliminate as many bugs as possible, as early in the dev cycle as possible. One solution is to use security-validated code templates. Another is to embed a security expert into every code release and conduct regular smoke tests to validate code.
When communicating with users, projects must detail their efforts to build trust in the community. With security being given such an intense focus by the community, any phishing attempts or malicious behavior will likely surface a lot faster, giving the project team a better chance of stopping it in its tracks.
Complex, but Worthwhile
Security is a complicated process in a DeFi project, but its benefits are apparent. By prioritizing security, DeFi projects can attract more investors, prevent malicious phishing attempts, and protect users at all times.
