As the use of decentralized applications (dApps) continues to rise, it has become infinitely important to ensure that you are taking the necessary precautions to secure your transactions as a user. This safety checklist is designed to help you understand the risks involved in interacting with dApps and how to mitigate them.
From understanding the security features of the dApp to properly storing your cryptographic keys, this checklist will provide an overview of the safety precautions you should take before engaging with any dApp.
- A dApp is a decentralized application built on top of a distributed network and is not owned or controlled by any single entity.
- Because of their decentralized nature, dApps are volatile, unregulated, ad vulnerable to security issues.
- What are the risks associated with dApps
- Use a secure wallet that offers features like multi-signature authentication, customer support, and backup/restore options to protect your assets
- Check that the code of the smart contract is open source and audited by reputable entities
- Research the team behind the project
What is a dApp?
A dApp is a decentralized application that is built on top of a distributed network—meaning that it is not owned by any one entity. dApps are built using blockchain technology and can be used to store, trade, and manage digital assets. They are typically open source, meaning that anyone can view and share the source code of the application. dApps are also often incentivized, meaning that users are rewarded with tokens or other digital assets for participating in the network.
Understanding the risks associated with dApps
Because of their decentralized nature, dApps are volatile, generally unregulated, and as such are vulnerable to security issues. It is important to understand the risks associated with dApps before interacting with them as these security issues can lead to the loss of funds and other valuable data. Many dApps are built on blockchain technology, which means that transactions may be irreversible, and funds lost are lost forever.
As you explore the world of DeFi and dApps, here are 8 ways to protect your crypto assets:
1. Use a secure wallet to store your funds
Wallets are dApps used to store cryptocurrency assets and it is important to make sure that whatever wallet you choose is one that offers you the best in terms of security.
Many wallets offer features such as multi-signature authentication, customer support, and backup/restore options to protect your assets. Additionally, these wallets are often tested and updated regularly so that your funds remain secure.
Popular options for Cardano dApps include Nami, Yoroi, and Eternl wallets. Investing in a trustworthy wallet is the best way to ensure that your cryptocurrency funds are safe.
2. Check the code of the smart contract
Ensure the code of the smart contract is available for review and that it is secure and up-to-date. Make sure to verify that the code is open source and has been audited by reputable third parties ensuring that the code has been tested and is bug-free. Additionally, check if the code has been deployed securely and is running in a secure environment. Operating with a dApp that hasn’t been properly audited and tested is like walking on a tightrope without a safety net — it’s a risky endeavor.
3. Research the team behind the project
Researching the team behind a project is important before interacting with a dApp because it allows you to make an informed decision about the trustworthiness of the project. This is because blockchain is a relatively new technology that extra precautions need to be taken compared to traditional finance apps.
Knowing the team’s background, experience, and past projects can provide insight into the quality, reliability, and security of their current application. Understanding the team’s vision and goals can help you determine whether the dApp is a good fit for your own needs.
Researching the team behind a project can also help you learn more about their dedication to customer service and timely updates that ensure the dApp remains innovative and secure.
4. Read reviews of the dApp
Reading reviews of a dApp before interacting with it is important because it can provide valuable insight into the quality of the application, its usability, and its potential risks. Reviews can give users an idea of how well the app performs, how easy it is to use, and what kind of feedback other users have had.
Reviews can also alert users to potential security vulnerabilities or other issues that could affect their experience and can help users determine if the app is trustworthy and reliable. It is always wise to do your research before interacting with a decentralized application.
5. Keep your recovery phrase safe and secure
It is extremely important to keep your crypto recovery phrase safe and secure. The phrase is essentially your key to accessing your cryptocurrency. Without it, and if you forgot your wallet login credentials, you will not be able to access your digital assets. It is also important to make sure that no one else has access to your recovery phrase, as they could potentially gain access to your funds.
Make sure to store your recovery phrase in a secure place and make sure it is backed up, as it is the only way to recover your crypto funds if you ever lose access to them.
6. Use a hardware wallet
Cryptocurrency hardware wallets are among the most secure and reliable ways to store digital assets. By keeping private keys and other sensitive data stored offline, hardware wallets provide significantly more protection against malicious actors than other methods of storage. Additionally, hardware wallets are also more difficult to hack than other solutions, as they are not connected to the internet. Furthermore, many hardware wallets are compatible with a variety of currencies, making them a great option for those who wish to store multiple digital assets. Lastly, hardware wallets are convenient and can be easily used on the go, making them ideal for those who need to access their funds quickly and securely.
The Ledger and Trezor hardware wallets are both highly trusted and used within the cryptocurrency ecosystem, with Ledger being the more popular of the two.
7. Verify website/dApp
Verifying a website or dApp is an essential step to take before conducting any kind of online transaction. Verifying that a website or dApp is safe will help protect your data and personal information from being stolen or misused. This can be done by looking for security seals, checking for a valid SSL certificate, and verifying the website’s or dApp’s reputation by reading online reviews and customer feedback.
Verifying a website or dApp should be done regularly, as malicious actors can change or modify the code and security of a website or dApp without warning. Taking the time to verify a website or dApp before interacting with it will help to ensure that your data and personal information remain safe and secure.
8. Secure connection and computer
Using a secure connection and computer when interacting with a decentralized application is of the utmost importance. Decentralized applications are built on top of distributed networks that are not owned by any one entity, so there is no central server to ensure the security of the data. Using a secure connection and computer can reduce the risk of your data being accessed by unauthorized parties.
A secure connection and computer can help protect you from malicious actors who may be looking to exploit security vulnerabilities in the system. It can also help protect your data from being stolen or manipulated and protect your personal information from being exposed.
By following this checklist, you can ensure that your interactions are secure and that your data is safe from malicious actors. By keeping these safety tips in mind, you can confidently use these applications without worrying about the potential of any harm coming to you or your data.
Good luck out there and stay safe! 🔐
The opinions shared within this article are those solely of MELD Ltd. and contributors. Note that the content within should not be considered financial, legal, or tax advice. Neither the author nor MELD Labs PTE Ltd. are financial, legal, or tax advisors. None of this content should be used to make any form of financial, tax, or legal decisions. Do your own research and consult professionals as needed for official policies, restrictions, and requirements in your jurisdiction.
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