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The solutions that blockchain technology profers can never be over-emphasised. However, as with any new technology, blockchain comes with challenges and risks. One of the most critical ones is security.

Blockchain networks, protocols, and smart contracts are complex software systems with vulnerabilities or bugs that may compromise their functionality, performance, or security. These vulnerabilities can be exploited by malicious actors who can cause damage, steal funds, manipulate data, or disrupt operations. The most recent of these is the Kyberswap hack, where the hacker reportedly drained $46 million from the Decentralized exchange, reports have it that the hacker is open to negotiations. This is not the first time Kyberswap is being exploited. It announced via its X (formerly known as Twitter) handle of a hack for $265,000 on September 1, 2022, Kyberswap offered 15% of what was taken to the hacker as a bug bounty.

To prevent scenarios like this, blockchain projects and companies need to ensure that their software or platform is secure and reliable. This is where blockchain bug bounties come in. Bug bounties are programs that incentivize ethical hackers or security researchers to find and report vulnerabilities in blockchain systems before they can be exploited. By doing so, they help improve the security and quality of blockchain projects and protect users and stakeholders.

Most blockchain projects have different frameworks for their bounty programs. However, we’ll take a look at the typical framework that is employed by these companies.

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Blockchain bug bounty programs typically follow these steps:

1. Definition of the bounty scope.
Organizations that initiate bug bounty programs define the scope of the program. This involves specifying the assets, type of vulnerabilities, components, protocols, or smart contracts eligible for testing. They also set the rules and guidelines for the program, such as the submission process, the reward structure, the disclosure policy, and the code of conduct.

2. Bug Discovery: Here, researchers and hackers participate in the bug bounty program by searching for vulnerabilities as defined in the bounty’s scope. They use various tools and techniques to analyze, test, and exploit the software while adhering to the program rules and ethical standards.

3. Vulnerability Identification: Once a vulnerability is discovered, the researcher documents and reports it to the organization running the program, usually through a secure reporting channel provided by the bug bounty platform. The report should include a clear and detailed description of the vulnerability, the steps to reproduce it, the impact and severity of it, and the suggested fix or mitigation.

4. Disclosure: The organization receives the vulnerability report and verifies and validates it. If the vulnerability is confirmed, the organization acknowledges the researcher and rewards them according to the program guidelines. The reward can vary depending on the severity and impact of the vulnerability and can range from small amounts of money to significant cash prizes. The organization may also agree to disclose the vulnerability to the public promptly and responsibly after fixing and patching it.

5. Severity Classification and Reward Determination: The organization classifies the severity of the vulnerability based on a standardized scale, such as the Common Vulnerability Scoring System (CVSS). The CVSS assigns a numerical score and a qualitative rating to the vulnerability, based on factors such as the attack vector, the attack complexity, the required privileges, the user interaction, the scope, the confidentiality impact, the integrity impact, and the availability impact. The organization then determines the reward for the researcher based on the severity rating and the program guidelines.

6. Reward Distribution: The organization distributes the reward to the researcher, either directly or through the bug bounty platform. The reward can be in fiat currency, cryptocurrency, or other forms of compensation.

7. Fixing the bug: The organization fixes and patches the reported vulnerability, either internally or with the help of the researcher or a third-party auditor. The organization then deploys the updated software to the blockchain network, protocol, or smart contract, ensuring that the vulnerability is resolved and the system is secure.

8. Public Disclosure: The project discloses the vulnerability to the public, either through a blog post, a social media post, a press release, or a security advisory. The disclosure should include a summary of the vulnerability, its impact and severity, the steps taken to fix it, and the acknowledgment and appreciation of the researcher who reported it.

Benefits of Blockchain Bug Bounty Programs

Blockchain bug bounty programs offer several benefits for both the organizations that run them and the researchers that participate in them. Some of these benefits are:

Improved Security: Blockchain bug bounty programs help improve the security and quality of blockchain projects by identifying and addressing vulnerabilities that may have been overlooked or missed by traditional testing and auditing methods. By doing so, they help prevent potential attacks, losses, or damages that could affect the users, stakeholders, or reputation of the project.

Cost-Effectiveness: Blockchain bug bounty programs provide a cost-effective way of securing blockchain software, as they only pay for valid and verified vulnerabilities, aside from paying contract “testers” or auditing services. They also leverage the collective intelligence and diversity of the security community, which can offer a wider range of perspectives, skills, and techniques than a single or limited team of testers or auditors.

Transparency and Trust: Blockchain bug bounty programs promote transparency and trust in the blockchain ecosystem, as they demonstrate the commitment and responsibility of the blockchain project to secure their software and protect their users and stakeholders. They also encourage responsible and coordinated vulnerability disclosure, which helps inform and educate the public about the security status and updates of the blockchain software.

Projects like Arbitrum, and Etherscan have bounty programs rewarding up to $2 million to hackers. Some of these bounties can be found on immunefi.com. Securing Assets For Users is always a priority for blockchain projects, which is why these bounty programs exist.