Home Finance What are the significant perils of WEb3 as an industry ?

What are the significant perils of WEb3 as an industry ?

by Lalithaa

Most apps that use decentralized architecture today have some things in common regarding risk. One of them is putting too much trust in Web 2.0 tools like Apple’s App Store, centralized CDNs, and DNS. This is how hackers attacked the online app MyEtherWallet, the Enigma ICO campaign, and, most recently, the Premont NFT platform. You should visit bitcoin revolution, you will have the opportunity to get an accurate impression of the trading of bitcoins.

One way to solve the problem would be to use technology like IPFS and Filecoin, making keeping an app’s integrity and availability easier. This is just one way to handle the problem. But more is needed to stop the attack discussed earlier in this paragraph.

Because of Apple’s internal rules, crypto-related mobile apps have only sometimes been able to be added to the App Store or get updates. Apps for iOS devices can only be downloaded from the App Store. Even if this strategy aims to protect iOS users and revenue streams, it is easier to make Web3 apps when one company has all the power. But both the US and the EU are trying to change the game’s rules.

Web3 companies like Solana are putting their toes in the water with this attempt, even though it’s hard to make a competitive alternative.

Another big problem is that most people who use Web3 apps access blockchain data through centralized APIs like Infura or Alchemy. When the Infura API stopped working in 2022 and 2020, all wallets, apps, and the whole Ethereum ecosystem was significantly affected.

Metamask, one of the most popular Web3 wallets, gets its information from Infura. It has more than 10 million users, and most need to learn how to switch the blockchain data provider when needed. Infura can also get and keep track of the IP addresses of end users. It can also connect these addresses to the addresses they use on Ethereum.

You might be able to change how things work in the future if you join the community. The Cointelegraph Innovation Circle allows big names in the blockchain industry to meet, work together, and publish.

If many people use light clients, the problem that comes from centralized blockchain data layers might be solved. Light clients connect a user’s device directly to a blockchain network. They are like a lighter version of blockchain network nodes. This would solve the problem when a blockchain’s data layer is all in one place. Even though this technology is still being prepared to be used in factories, it is expected to get better shortly.

Also, many different kinds of cybercriminals try to break into centralized exchanges. The site hedgewithcrypto.com says that 46 cryptos have been stolen from centralized exchanges since 2012. When this article was written, a total of $2.66 billion had been stolen.

Most people don’t keep their cryptocurrency on a central exchange. Instead, they keep it in their private wallets. Some self-custodied wallets are better than seed phrases because they eliminate the problems that come with them. Even though using a typical seed phase-based wallet has risks, this is still true. Another risk could be putting too much faith in centralized stablecoins like the USDT token that Tether makes. 

A one-dollar drop in price

Even though these assets are issued on a blockchain, centralized companies still give and manage them. Even government workers sometimes find it challenging to figure out the reserves behind centralized stablecoins. Also, the companies that make these stablecoins can freeze the money of any user whenever they want.

This takes away from the benefits of using cryptocurrencies. The risk is growing because more people use centralized stablecoins on the market. If the chance comes true, the risk could send shock waves through the whole industry.

Web3’s main selling point is that its online infrastructure is not centralized and is run by its users. In the long run, the above-centralized power sources make it hard for the industry to move forward.

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