What Best Practices Should Web3 Platforms Follow During Incidents?

Web3 is full of opportunity, but it also comes with more than a few challenges.  Some of these challenges stem from maturing regulation, some stem from the technology itself, and some are a result of pushing innovation faster than we can keep up (for better or worse).

The industry has been around long enough to see a long list of “incidents,” whether they are security breaches, rug pulls, 51% attacks, and more.  Centralized platforms have seen insider corruption, while flaws in code have led to major heists that have yet to be solved.

Looking strictly at the news, the industry is often painted in a dubious light, which is caused by two key things.  First, the stories are often sensational compared to the substantial but traditional methods of misconduct that occur in other industries.  We see incidents of insider trading, corruption, misleading investors, and data hacks on a daily basis. 

However, seeing the Web3 incidents happening to startups, and performed by unknown actors creates major stories, and gets more attention.  The second reason for this is that many of the average viewers simply don’t have the basic technical foundation to understand what is happening in the Web3 industry, and this is often true as well of those reporting the stories. 

Because of this, events are drastically oversimplified and the industry as a whole is seen as an unregulated gamble.  This is not true at all, but it means that the Web3 community has an uphill battle in gaining legitimacy among the more traditional, but necessary audience that we hope to some day adopt Web3 practices.

What can be done then to combat this reputation?  There are many different best practices to follow as a Web3 platform, with many of these practices far superior to their TradFi counterparts. 

Transparency, accountability, auditable records, and an open line of communication with your community are the most foundational level of expectations.  All Web3 platforms should have this type of relationship with their communities, who put their trust and often money into the platform. 

Because there is rarely a brick-and-mortar “store” for these people to find, trust and openness must be expressed in different ways.  In more decentralized platforms, there isn’t even a face of the company, or names of team members.  Instead, fully decentralized platforms operate in a trustless manner.  And that element of “trustlessness” requires strong safeguards to ensure that the community is protected, not by any individual or regulatory agency, but through trusted and verifiable practices.

Dealing With an Incident

Web3 platforms should work hard to ensure they are open about their policies, processes, and above all else, show where the money is and be accountable to it.  The code should be audited, new risks of scams should be well researched so the platform can prevent them, and the platform should continuously test for weaknesses that it can shore up before issues occur.

But what happens if a Web3 platform is genuinely doing all these things, and an incident happens regardless?  This was the case recently with Byrrgis, a DeFi app preparing to launch on Solana and Ethereum, offers professional trading tools and creates curated packs of coins for users of all levels to purchase.  In the last few months, the platform’s development was hit with a one-two blow that could have toppled them (and their community) before they even launched.  

The first incident happened when a trusted contractor abused their administrative privileges during a bridge development process.  The party performed seemingly unethical behaviors as they minted unauthorized tokens and damaged the token’s liquidity.  The second incident, completely unrelated, happened soon after as a whale investor dumped approximately 2% of the WOLF token supply, shaking the market and affecting all token holders.

While lessons were learned in both cases, Byrrgis could show that it was following the best practices and being proactive in building up its community.  Either of these incidents would be unfortunate but difficult to prevent, and together left a deeper impact on token holders and the larger community.

At this point, the platform had a choice to make, as all Web3 platforms will when they suffer an incident, even one that is extremely difficult to prevent.  Hiding the substance of the issue, downplaying the effects, and working to distract the community are all tools in the PR playbook.  However, none of these choices would benefit the community, and would likely impact the reputation of Web3 as a whole.

In this case, the Byrrgis team made several decisions that likely saved the platform, prevented further harm to the community, and did it all in a refreshingly transparent way.  They first shut off the contractor access before more damage could be done. 

To counter the sell off, the team connected with top holders of the token, representing nearly 60% of tokens, and came to an agreement with all of them:  lock up the token for two years, show the community we have complete faith in the long term health of the platform, and put your money behind those words.  

These actions were both commendable, but the best practice came from the very open announcement sharing exactly what happened (and not trying to deflect blame or soften the actual impact).  The team laid out the two occurrences, shared what actions they had taken, and then showed the net impact. 

The message was clear:  this sucks, we got it handled, we will prevent these issues from happening again, and we are working to recover starting with a major token lock.  Time will tell, but it’s likely that despite these incidents, the Byrrgis community will come out of this stronger than before, and the team has earned significant trust and respect from the community by telling it like it is even though they did their best to resolve it.

Let’s hope that this is a lesson to all Web3 platforms who, like it or not, are ambassadors for the industry.  We need better stories like this that show the very best of what Web3 can be: a community vs. a heartless corporation.  Through thick and thin, communities that are transparent and accountable will endure far longer than the average TradFi firm.

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