96 - Keys & Tokens
Keys & Tokens: While “crypto” may indeed mean cryptocurrencies to some non-technical observers, it factually refers to cryptography which is a fundamental bedrock of Web3. As much as we unknowingly use cryptography in the Web2 world, Web3 is taking it to the masses. Cryptographic keys are first-class members of the Web3 world.
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Without the presence of Web2 trusted intermediaries who can otherwise reset passwords or restore accounts/assets from their centralized databases, Web3 ideologically pushes the onus of managing keys (and the assets they control) to end users in their wallets. Loss of private keys (or seed phrases) is irreversible and many assets have been lost to such incidents. This is a significant mindset shift from the Web2 world where passwords have become far too common, security pundits are tired of bemoaning the use of commonly reused simple passwords, password databases continue to be dumped and password-killing technologies continue to evade us. Web2 passwords here symbolize the role of trusted centralized intermediaries that Web3 is seeking to replace.
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Web2 security breaches targeting financial assets (i.e. excluding ransomware and botnets for DDoS) typically involve stealing of financial or personal data which is then sold on the dark web and used for monetary gain. This is getting much harder because of various checks and measures (both technical and regulatory) being put in place (at centralized intermediaries) to reduce such cybersecurity incidents and prevent anomalous asset transfers. When such unauthorised asset transfers do happen, the involved intermediaries may even cooperate to reverse such transactions and make good.
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The notion of assets in Web3 is fundamentally different. Cryptoassets are borderless digital tokens whose accounting ledger is managed by consensus on the blockchain and ownership is determined by access to corresponding cryptographic keys. If someone gets access to your private keys controlling cryptoassets, they can transfer those assets to blockchain addresses controlled by their keys. In a perfectly decentralized world, no intermediary (e.g. centralized exchange) should exist that can reverse such a loss — transactions are immutable. Because there are limited response options, preventive security measures become more critical in the Web3 space.
- Passwords vs Keys
- Reset/Restore Vs Permanent Loss
- Data vs. Tokens
- Fines/Regulations/Reversals Vs. Irreversible/Immutable