Challenges faced by Web 3.0 users today.
There is a growing need for the following services for the users to navigate the Web 3.0 world more safely:
- Regulatory Compliance
- User Authentication
- Damage Relief
Web 3.0 applications provide decentralized services to users with autonomy and authority over their assets. However, to enjoy this autonomy, there are practical risks that one must endure.
Take an example with a DeFi application user: Bob, who uses a DeFi service called 'Compass Swap.'
Bob had his private keys inadvertently stolen by a hacker. Bob panics, seeing all his digital assets transferred out of his wallet to various unknown addresses. Like most of us, Bob is not a cybersecurity expert and does not know what to do. Who and where could he get help?
First, let's see how Regulatory Compliance may become a factor in resolving Bob's case. Bob may first seek the help of the police and law enforcement to recover his assets. However, to get help, the authorities must be able to recognize the incident and the parties involved within their existing legal framework. Whether 'Compass Swap' is a recognized service provider that is compliant with the relevant KYC/AML regulations of its jurisdiction may make all the difference in Bob's ability to get help from the relevant authorities.
Second, let's see how the User Authentication service (or the lack of such service) may play a part. As the hacker has Bob's private key, the private key can be copied multiple times and held by anyone. Thus, Bob must prove that he is the real victim and original owner of the compromised wallet and private key. However, this becomes challenging when Bob has no historical record or method of authenticating that he is the original owner of the compromised wallet and private key.
Third, let's see how Bob would recoup his losses. Even if Bob managed to prove that he is the victim of the hacking incident, Bob is faced with a technical challenge when trying to recover his funds. In DeFi, unlike traditional finance, it is difficult to freeze the suspect's account and recover the victim's stolen assets. Therefore, there is a need for damage relief services that could help victims navigate the Web 3.0 ecosystem more safely.