1inch’s AML screening tools for Web3 security

In this post, we’ll explore how 1inch leverages the most advanced tools to ensure efficient Web3 security.

Because the decentralized nature of DeFi opens it up to misuse by bad actors, Web3 security is vital. Unlike traditional finance where centralized entities can intervene in case of fraud, a decentralized ecosystem relies on blockchain transparency and tools from TRM Labs, Etherscan, Blockaid, Hypernative or ZeroShadow to prevent malicious activities. The implementation of robust security measures helps maintain the integrity of the system, protect users from scams and foster trust in DeFi ecosystems.

TRM Labs

Identifying and blocking potential bad actors based upon a range of risk categories – from sanctions and fraud to darknet exposure and other financial crime indicators – is a top priority for 1inch.

Since 2022, 1inch has used TRM Labs’ on-chain crypto fraud and financial crime detection tool to screen user wallets. Using TRM’s API, 1inch queries data about addresses and transactions, including on-chain exposure to economic sanctions, terrorist financing, hacked or stolen funds, hacker groups, ransomware, scams, human trafficking, child sexual abuse material and many other types of illicit activity.

From a list compiled from hundreds of millions of sources, TRM’s API returns a risk score that indicates whether the address is owned, controlled or associated with a sanctioned entity or other form of illegal activity (ownership risk), or if it has transacted with a sanctioned address or one linked to illegal activity (counterparty risk).

1inch automatically restricts access for users that present certain risk factors, preventing them from connecting to the 1inch dApp, the 1inch Wallet, or the use of 1inch’s APIs, as well as from conducting any transactions via these services (such as staking or delegating). If a user believes that they have been misclassified, they can request a manual review.

Etherscan Pro

Etherscan blockchain analytics focuses on the efficient linking of pseudonymous data (assets, addresses, events) to real-world people, entities and events. This is the reason why 1inch also employs Etherscan Pro metadata registry for screening purposes. 1inch leverages Etherscan’s breadth, depth and speed of labeling to amplify the efficacy of its screening efforts.

When a wallet connects to the platform, 1inch uses TRM Labs, Etherscan Pro and other tools described below to ensure the wallet is safe before allowing transactions.

Blockaid

The 1inch security team also uses tools from Blockaid to (a) identify and alerts users to malicious decentralized applications (dApps) before they connect, ensuring that users avoid harmful platforms, (b) simulate transactions before they occur, showing which assets will be transferred and detecting whether the transaction is malicious or safe, and (c) distinguish between spam and legitimate tokens, hiding spam tokens automatically and flagging suspicious ones.

Blockaid functions as a Web3 security layer, protecting users from interacting with fraudulent or harmful entities.

Hypernative and similar

Another tool the 1inch security team is utilizing is Hypernative, a Web3 security and real-time risk prevention platform designed to stop a wide range of cyber attacks. It monitors on-chain and off-chain data in real-time to detect potential threats before they happen, creating a database of bad actors in the Web3 space. By leveraging machine learning models and advanced monitoring tools, Hypernative helps to secure user interaction with 1inch products by ensuring that the wallet is safe before allowing transactions.

By integrating Hypernative and similar solutions databases, 1inch is creating a super-database that leverages overlapping independent sources and methods to screen wallet activity and minimize opportunities  for bad actors to utilize its ecosystem.

ZeroShadow

1inch uses ZeroShadow as an external security team to detect and fight exploits and other illicit activities. ZeroShadow is a leading Web3 security solution that offers comprehensive protection services, ranging from prevention to incident response and recovery. ZeroShadow provides around-the-clock monitoring through its 24/7 International Security Operations Center (SOC). The platform specializes in handling critical security situations, tracing on-chain transactions, and working closely with law enforcement.

ZeroShadow’s solutions encompass on-chain tracking, real-time threat detection, and advanced algorithms to mitigate fraud and malicious activities before they impact protocols or users. For 1inch, that means continuous upgrades to the 1inch internal blocklist and real-time  incident response.

We also collaborate with specialized investigative teams and the crypto ecosystem’s key members to stay constantly alert to potential threats or bad actors. By implementing proactive monitoring and rapid response strategies, we aim to ensure the highest level of security and trust across DeFi and the larger crypto landscape.