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Web3 is set to become the next iteration of the internet. And, while it has been on the horizon for some time now, it remains to be seen just how it will look and operate.
Still, while there is no rigid definition yet, several core principles are guiding its creation.
Notably, it will be decentralized — its ownership will be distributed as opposed to controlled by a handful of large corporations; permissionless — providing equal access; and trustless — as opposed to control by a central authority, participants must reach a consensus.
It will also have native payments. That is, cryptocurrency — in contrast with traditional banking infrastructure.
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But crypto, as we’re all aware, has had several significant security challenges.
“Ultimately, Web3 is a young and evolving ecosystem,” said Deddy Lavid, cofounder and CEO of automated detection and response platform CyVers. “We are only at the beginning of creating its infrastructure — but one of the leading Web3 challenges is the theft of assets.”
CyVers has sought to address this problem with its real-time prevention and detection platform; to help further this mission, the company today received an infusion of $8 million in funding led by Elron Ventures.
Ultimately, the goal is to “bring proactive Web3 cybersecurity standards to financial institutions,” said Lavid.
The power of blockchain
At its core, Web3 uses blockchains, cryptocurrencies, and nonfungible tokens (NFTs) to put ownership in the hands of users.
Blockchain is a distributed database of blocks linked through cryptography. This decentralized, distributed and public digital ledger records transactions across many computers so that records cannot be retroactively altered without network consensus or altering every subsequent block.
Lauded as faster, cheaper, traceable, immutable, and universal, it is set to be the next financial system, said Lavid — but like Web3 itself, the technology is still in its early days.
But many have been skeptical of crypto from the start — and a spate of cryptocurrency-based crimes have only served to compound that. The theft of digital assets surged to $22 billion in 2022, with 95% of stolen assets occurring in the decentralized finance (DeFi) sector.
Recent high-profile hacks — to the tune of hundreds of millions — have included PolyNetwork, Ronin Bridge and Wormhole.
Cross-chain bridges enable the transfer of digital assets and sensitive information between independent blockchains; this year alone, cross-chain bridge hacks have accounted for the majority of stolen crypto funds. More than $1 billion has been swiped via such hacks recently.
Lavid pointed out that since the 2020 crypto rush, the market has been struggling with a spate of factors: liquidity, volatility, overhyped applications, bankruptcies, negligence, prevalent fraud and theft, overall mismanagement and a lack of trader trust.
“It’s harder than ever to trust crypto,” he said.
Still, the global cryptocurrency market is expected to reach nearly $12 billion by 2030, registering a compound annual growth rate (CAGR) of roughly 12% from 2022. And, by one estimate, the blockchain technology market is expected to balloon to $1.59 trillion by 2030, registering a CAGR of 87%.
Platforms like CyVers have emerged as a result; the company’s software-as-a-service (SaaS) platform helps to detect criminal activity and provides real-time intelligence to stop it, Lavid explained. It is agentless and requires no deployment, and can be quickly integrated through an API or plug-in.
Compliance, fraud and risk teams can automatically identify and respond to incidents across the entire crypto attack surface, said Lavid. CyVers can freeze illicit transactions and return stolen funds once an attack is detected — and before they become immutable on the blockchain.
Lavid said the platform leverages artificial intelligence (AI) and machine learning (ML) to detect whether there is a pattern of abnormal or suspicious activities, patterns or criminal behaviors. Graph representation learning, or graph embedding, extracts structural information from networks, while representation learning enables graph-based ML, network-driven anomaly detection and visualization.
In a screening process, addresses are checked against a deny list of addresses that the system has marked as problematic, Lavid explained. This list is based on extraction and analysis of the transaction history in different blockchain networks, smart contract events, logs, functions and other variables. This is then combined with data from public sources.
CyVers then makes an immediate decision about whether to approve or deny a transaction, and a report is then issued explaining the decision and findings, as well as risk scores on transactions and suggested corrective actions.
The company moves away from blacklists, code auditing, and fund tracing, identifying cyber-attacks and carrying out corrective measures within milliseconds, said Lavid.
Founded in early 2022 by Meir Dolev and Lavid (who holds 11 patents in automated anomaly detection), CyVers serves financial institutions, banks, wallet providers, decentralized finance protocol companies, custodians, and exchanges.
Trustworthy and transparent Web3
As for the benefits of Web3 itself, Lavid pointed out that centralized enterprises like Facebook, Google and Apple have helped millions of people join the current internet while establishing the infrastructure on which it runs. Still, that has given a handful of centralized entities a stronghold on large swathes of the internet, “unilaterally deciding” what should and should not be allowed.
“Today, large technology companies monopolize the web,” he said. But Web3 is decentralized, meaning that users build, operate and own it.
“Another way to look at it is Web2 is the internet of data,” said Lavid, “and Web3 is the internet of values.”
And, CyVers aims to help enable that. As Elik Etzion, managing partner at CyVers investor Elron Ventures, commented, “together, we are enabling a world of a trustworthy and transparent Web3.”
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