What security issues should cryptocurrency users pay attention to?
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What security issues should cryptocurrency users pay attention to?
Risk always occurs in the unknown.
Navigating Web3 tides with focused insightsAuthor: @cmdefi
"Security" should be the biggest topic in the industry for at least the next 10 years, as it currently presents contradictions on both the decentralized and centralized fronts. Leveraging recent discussions around exchange security issues, let's dive into this from the following angles:
1. Asset self-sovereignty
2. Smart contract security
3. Censorship resistance
4. Wallets
1/4 Asset Self-Sovereignty
Decentralization offers significantly greater asset self-sovereignty compared to centralization—meaning users have full control over their assets. This was the dominant narrative during DeFi Summer and served as the starting point for the massive "withdrawal movement" that followed.
However, as smart contract exploits and unauthorized token thefts become increasingly common, higher asset self-sovereignty does not necessarily equate to stronger security. Many ordinary users lack the ability to identify risks, and managing assets securely on-chain demands substantial time and experience. This raises the barrier to self-managing assets ever higher.
As a result, newcomers still tend to prioritize entrusting their assets to exchanges or institutions—initially with the intention of leaving specialized tasks to professionals. But doing so means giving up asset self-sovereignty in exchange for custodial services provided by centralized entities.
Today’s industry landscape shows exchanges and on-chain platforms serving largely different user groups, each carrying their own risks—albeit in different forms. On-chain self-management grants strong autonomy; you can 100% own your assets, but only if you possess sufficient experience and risk management skills. Entrusting assets to exchanges is simpler, but exposes you to centralization risks. There is no perfect solution. What matters most is clearly understanding where the risks lie—and maintaining constant vigilance.
2/4 Smart Contract Security
"Risk always arises from the unknown."
Beyond asset management, from a DeFi project perspective, immutable and permissionless smart contracts are considered decentralized and tamper-proof. But does this guarantee absolute security? Not necessarily. Since code-level risks in smart contracts cannot be fully predicted or simulated, a critical vulnerability in a key contract—with no possibility of centralized intervention—could lead to irreversible losses. This has happened numerous times in early-stage DeFi.
How will smart contract security evolve in the future? In line with the original vision of decentralization, simple smart contracts that have stood the test of time and market scrutiny will be the first to achieve "hardening"—becoming fully decentralized and immutable. Complexity will then gradually increase. During this process, more complex projects will likely need emergency mechanisms at critical points to minimize or recover losses during major incidents (though various permission constraints are typically used to prevent excessive centralization and its associated risks).
Therefore, smart contract security is something that must undergo long-term testing and validation over time. All current FUD (fear, uncertainty, doubt) regarding DeFi security is essentially casting doubt on the industry’s future. The security challenges facing smart contracts today are ones that all future on-chain projects—whether GameFi or SocialFi—will inevitably face. DeFi is simply walking this path first. Only after laying enough hardened foundations can the road ahead become smoother.
3/4 Censorship Resistance
Censorship resistance is an aspect many easily overlook. Most people think they're just trading tokens or making simple transactions, so censorship feels distant. But once you’ve experienced it even once, you’ll immediately recognize its importance—because it directly reveals that without decentralization, your money isn’t truly 100% yours. We won’t elaborate further here, but anyone who understands this realizes that censorship resistance is arguably the most crucial part of the decentralization vision.
In this regard, it complements asset self-sovereignty—decentralized management is indeed superior to centralized alternatives.
4/4 Wallets
When storing assets on-chain, we commonly encounter cold wallets, hot wallets, and hardware wallets.
Cold Wallet: Simply put, a cold wallet keeps private keys completely offline during creation and management. You can even create one yourself—for example, using an old iPhone. Numerous tutorials and guides are available online. From a personal management standpoint, this method currently offers very high security. Your only concern is ensuring the piece of paper with your recovery phrase doesn’t get lost.
Hardware Wallet: First, it's not synonymous with a cold wallet. Hardware wallets involve various hardware technologies, and generally also generate private keys offline. However, controversy exists because hardware providers are centralized entities, potentially introducing theoretical centralization risks. On the other hand, hardware wallets add an extra verification step before executing transactions—similar to protections like USB security keys or authentication cards.
Hot Wallet: Hot wallets are the most commonly used in daily operations. They’re lightweight and flexible, ideal for frequent on-chain interactions. However, repeated authorizations and signatures—especially granting access to upgradeable contracts—may appear harmless initially but could introduce new risks later if those contracts are upgraded, planting hidden landmines for the future.
Wallet setup usually depends on individual needs. Ultimately, wallet security boils down to the security of private keys and permissions.
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@cmdefi
