Common Security Challenges in GameFi

Basics

GameFi projects face distinct security challenges that can be divided into two categories: on-chain and off-chain issues. On-chain security challenges encompass the management of ERC-20 tokens and NFTs, the secure operation of cross-chain bridges, and the governance of decentralized autonomous organizations (DAOs). In contrast, off-chain challenges primarily pertain to web interfaces and servers.

It is crucial for GameFi projects to prioritize security measures. These include conducting thorough audits, performing vulnerability scanning, conducting penetration testing, and implementing best operational practices and business controls. By adopting these security measures, GameFi projects can enhance their overall protection.

What Is GameFi? 

GameFi merges blockchain technology with gaming, establishing decentralized platforms incorporating in-game assets and digital currencies. Its play-to-earn (P2E) model enables players to earn cryptocurrency rewards while granting them actual ownership and complete authority over their in-game assets.

Despite its rising popularity, GameFi has encountered persistent and substantial security risks. Specific projects may prioritize speed over quality and overlook robust security measures, endangering the community and creators with the potential for significant losses.

What Is the Importance of GameFi Security?

In 2021, GameFi experienced substantial growth thanks to its play-to-earn (P2E) model that introduced innovative financial opportunities within games. The subsequent rise of move-to-earn projects in 2022 further showcased the growth potential of GameFi. GameFi emerged as the leading sector in the crypto industry in 2022, securing approximately 9.5% of total funding and achieving a remarkable year-on-year growth of over 118%.

GameFi stands apart from traditional gaming due to the higher stakes for users, where any potential hack can result in significant losses. In the worst-case scenarios, security breaches can even lead to the demise of a project.

For instance, in 2022, attackers exploited a backdoor in a Remote Procedure Call (RPC) node to access Axie Infinity, a prominent GameFi project. This allowed the attackers to execute unauthorized withdrawals of nearly $600 million in ETH. The existence of vulnerabilities in GameFi projects can expose investors and players to substantial financial losses, emphasizing the critical importance of prioritizing GameFi security.

On-Chain Security Challenges 

Token Vulnerabilities in the ERC-20 Standard 

GameFi projects commonly utilize ERC-20 tokens as a virtual currency within the game ecosystem, serving various purposes such as in-game purchases, player rewards, and exchanges.

Security risks can arise from improper minting and management of ERC-20 tokens. One particular vulnerability, reentrancy, can occur during the minting process. Attackers can exploit a loophole in the contract's logic to repeatedly execute a specific function, creating an infinite number of tokens.

The stability and quantity of ERC-20 tokens play a crucial role in the playability and sustainability of a game. Therefore, projects must ensure the integrity of their code logic and exercise strict control over the total supply of ERC-20 tokens.

In 2022, the P2E GameFi project DeFi Kingdoms fell victim to a malicious ERC-20 minting attack. Exploiting the logic vulnerability, some players were able to mint the game's locked native tokens, leading to a subsequent sharp decline in the token price.

The Vulnerability of NFTs

In GameFi projects, NFTs serve as virtual assets encompassing equipment, props, and souvenirs. These NFTs provide players with clear ownership and the potential for stable value through inflation control and scarcity. However, mishandling NFTs can introduce security vulnerabilities.

The value of NFTs lies in the rarity of the associated equipment or props, motivating players to seek the most uncommon NFTs. During the NFT minting process, block-related information like timestamps can be utilized as a pseudo-random source to generate NFTs with varying rarity levels. Unfortunately, miners can manipulate the block timestamp to some extent, maliciously minting rarer NFTs.

Certain risks remain even with reliable randomness sources like Chainlink VRF (Verifiable Random Function). Malicious users can repeatedly manipulate operations during the minting process to generate undesired NFT token IDs until a rare NFT is obtained.

When players engage in NFT trading and transfers, vulnerabilities may arise. The safeTransfer() function transfers ERC-721 NFTs. If the receiver is a contract address, the function onERCReceived() is triggered as a callback. This introduces reentrancy attacks, where attackers can manipulate the logic within the function. Similar risks exist for ERC-1155 NFTs, where the safeTransferFrom() function triggers the onERC1155Received() function, enabling potential reentrancy attacks by malicious actors.

The Vulnerability of Bridges 

GameFi utilizes cross-chain bridges to facilitate the seamless exchange of in-game assets across diverse networks, enhancing the overall GameFi experience and liquidity. However, cross-chain bridges in GameFi pose a significant risk associated with inconsistencies in handling in-game assets. The contracts governing these bridges should ensure that the same quantity of assets is accepted and burned on both ends of the bridge. Unfortunately, vulnerabilities in the verification and accounting contracts can be exploited by attackers to generate a substantial number of assets out of thin air.

Risks Associated With DAO Governance 

Within the GameFi ecosystem, numerous projects operate under the governance of Decentralized Autonomous Organizations (DAOs). However, this introduces a potential risk of centralization when a small group of large entities holds the majority of governance tokens. Moreover, the smart contracts that outline the rules for DAO governance can create vulnerabilities, enabling attackers to exploit weaknesses and gain unauthorized access to the DAO treasury.

Off-Chain Security Challenges 

GameFi projects often rely on centralized servers for various off-chain operations, such as back-end functions, web interfaces, and mobile apps. These servers store crucial data, including game information and user accounts, making them susceptible to malicious attacks like penetration testing and Trojan horse malware.

In the case of NFTs, the descriptive metadata is typically stored as JSON files off-chain. However, some GameFi projects store this metadata on their centralized servers instead of utilizing decentralized infrastructure like IPFS. This practice increases the risk of tampering by authorized parties or attackers, potentially compromising players' rights.

Regarding cross-chain bridges, attackers may exploit vulnerabilities to access validators' signatures or private keys through penetration testing or phishing attacks. By compromising the infrastructure, attackers can manipulate the system and gain control over in-game assets.

During data transmission, attackers may intercept and inject network packets with malicious code. By modifying the data, attackers can execute fraudulent transactions and acquire more in-game items using the purchase amount.

Front-end interfaces also provide a potential entry point for attackers to infiltrate the system. If there is an information leak on a game leaderboard, attackers can send the leaked address-related data to the server to obtain sensitive information associated with those addresses.

Ways to Improve GameFi Security

To ensure the safety of GameFi projects, it is essential to exercise caution throughout the entire process. A strong foundation lies in flawless smart contract codes, which can be achieved by writing high-quality code, conducting regular audits, and utilizing formal smart contract verification techniques.

Maintaining the security of servers and other infrastructure components is equally crucial. Regular penetration testing should be performed to identify and address any potential vulnerabilities. In the context of DApp- and blockchain-based systems, penetration testing should also consider the unique features of Web3, including digital wallets and decentralized protocols.

Adhering to best practices is essential for GameFi projects. This includes implementing a secure runtime process, which involves monitoring security events, strengthening environment security measures, and establishing bug bounty programs.

Furthermore, projects need to have a comprehensive emergency response plan. This plan should encompass measures such as stop-loss disposal, tracking and analyzing attacks, and addressing any identified issues promptly.

Conclusion

GameFi, a significant part of the future of gaming, must prioritize security to safeguard its ecosystem. While this article highlights some security vulnerabilities, it is essential to acknowledge that there are additional risks that GameFi projects must address. 

Numerous incidents have demonstrated that some projects have overlooked or underestimated security concerns, resulting in detrimental consequences. To ensure the long-term success and trust of GameFi, it is crucial for projects to prioritize security and prioritize the interests of their communities consistently.

By taking proactive measures, conducting thorough security assessments, and actively addressing vulnerabilities, GameFi projects can create a secure and resilient environment for their users. This safeguards the platform's integrity and fosters trust and confidence in the broader gaming community.