Setting Up a Working Group for Security and Audits

Smart contract exploits and protocol hacks have resulted in over $7 billion in losses since 2020, according to Chainalysis. For development teams, this isn't just a theoretical risk—it's an existential threat to user funds and project credibility. A formal Security Working Group (SWG) moves security from an ad-hoc, reactive process to a proactive, institutionalized discipline. It creates a clear framework for decision-making, accountability, and continuous improvement, ensuring security is embedded in the project's lifecycle from day one.

An effective SWG is not a single auditor or a part-time role. It's a cross-functional team with defined responsibilities, including: - Establishing and enforcing security policies and standards (e.g., using the Slither static analysis tool). - Managing the audit lifecycle from vendor selection to remediation tracking. - Running internal threat modeling sessions and incident response drills. - Maintaining a vulnerability disclosure program (like Immunefi) and managing bug bounties. This structure ensures no critical security task falls through the cracks.

Consider the practical impact. Without a SWG, a team might rush a contract to audit without proper internal review, wasting time and budget. With a SWG, the process is streamlined: the group defines scope, selects auditors based on a rubric, prepares comprehensive documentation, and triages findings using a severity matrix (e.g., Critical, High, Medium, Low). This leads to more efficient audits, clearer communication, and faster, more reliable fixes. The SWG owns the entire process, from the initial commit to the final post-audit deployment check.

The authority of the SWG must be clearly defined in the project's governance. For DAOs, this often means a ratified mandate from token holders. For corporate entities, it requires executive sponsorship. The group should have the power to halt deployments if critical vulnerabilities are found and the budget to commission necessary audits. This formal authority separates a working group from an informal committee, giving it the teeth needed to enforce security standards and protect the protocol effectively.

Finally, a SWG fosters a culture of security. It serves as an educational hub, creating resources for developers on secure coding practices for Solidity or Rust (for Solana programs). It tracks emerging threats from sources like Rekt.news and adapts the project's defenses accordingly. By institutionalizing security knowledge and processes, the SWG builds long-term resilience, turning security from a cost center into a core competitive advantage and a fundamental promise to users.

A security working group is a specialized, often multi-sig governed team responsible for the end-to-end security posture of a protocol. Its core mandate includes proactive threat assessment, managing audit processes, incident response coordination, and overseeing bug bounty programs. Unlike a general technical committee, this group requires explicit authority, a dedicated budget (typically 3-5% of treasury for high-value protocols), and clear reporting lines to the broader DAO. Establishing this entity via an on-chain governance proposal is the foundational act, granting it legitimacy and operational scope.

Before the group can function, the protocol must meet key technical prerequisites. The codebase must be in a stable, feature-frozen state on a main development branch (e.g., main or release/v1.0). All Smart Contract logic should be fully implemented with comprehensive NatSpec comments. A reproducible build environment using tools like Foundry or Hardhat is non-negotiable, as auditors must be able to compile and test the exact code being reviewed. Furthermore, a suite of unit and integration tests with high coverage (aim for >90% on core contracts) demonstrates code stability and reduces auditor time spent on basic logic flaws.

The working group's first operational task is to create a Request for Proposal (RFP) document for auditors. This should include: the finalized scope of contracts, the current test coverage report, deployment addresses on a testnet, access to documentation, and the desired audit timeline. Groups often use platforms like Code4rena, Sherlock, or Cantina to manage this process. Simultaneously, the group should establish a Vulnerability Disclosure Policy and set up a dedicated, secure channel (e.g., via Immunefi or a private Discord) for white-hat hackers, defining severity tiers and corresponding bounty rewards.

Governance for the working group itself is typically enforced via a multi-signature wallet (e.g., Safe) with 3-of-5 or 4-of-7 signatures required for treasury payouts to auditors or bounty hunters. Membership should be transparent, listing qualified individuals with expertise in smart contract development, cryptography, and DeFi economics. The group's budget approval, audit report publication, and post-audit fix verification should all be subject to community vote, ensuring accountability. This structure balances operational efficiency with necessary DAO oversight.

Finally, the process doesn't end with an audit report. The working group must manage the remediation phase, tracking all identified issues in a public ledger (like a GitHub Project board), overseeing the implementation of fixes, and coordinating a re-audit for critical vulnerabilities. They are also responsible for creating a Post-Audit Action Report for the community, detailing findings, fixes, and any residual risks. This closes the loop, providing the transparency and verifiable security that users and integrators require to trust the protocol.

A governance proposal is a formal document submitted to your DAO's voting mechanism, such as Snapshot or a custom on-chain voting contract. Its primary purpose is to secure community approval and on-chain legitimacy for the new working group. The proposal should clearly articulate the problem statement—why a dedicated security team is necessary—and the proposed solution. This includes the group's core responsibilities, which typically encompass smart contract audits, incident response protocols, bounty program management, and security education for the broader community.

The proposal must specify the operational and financial framework. This includes the initial multisig signers or council members, the working group's treasury address, and the budget allocation for its first operational period (e.g., 6-12 months). Budget items should be detailed: audit costs (e.g., $30k-$100k per audit from firms like OpenZeppelin or Trail of Bits), bug bounty funds, tooling subscriptions (e.g., Slither, MythX), and compensation for contributors. Clearly defined success metrics and reporting requirements (e.g., quarterly transparency reports) are crucial for accountability.

For on-chain execution, the proposal's payload often calls a function on the DAO's governance contract. A typical pattern involves using a Timelock controller to queue transactions that grant roles or transfer funds. For example, after a successful vote, an encoded transaction could call grantRole(bytes32 role, address account) on a AccessControl contract to assign the SECURITY_ADMIN role to the working group's multisig, or execute a transfer from the DAO treasury to the group's designated Gnosis Safe address.

Strategic framing is key to passing the proposal. Engage key community members and delegates in forums like Discord or the DAO's governance forum (e.g., Discourse) well before the snapshot vote. Publish a Request for Comment (RFC) to gather feedback and refine the proposal. Address common concerns proactively: how the group avoids centralization, its recusal process for conflicts of interest, and how its performance will be evaluated. A transparent and collaborative drafting process significantly increases the likelihood of a successful vote.

Once the voting period concludes and the proposal passes, the approved transactions are executed via the Timelock. This marks the official, on-chain creation of the security working group, granting it the authority and resources defined in the proposal. The subsequent step is to operationalize this mandate by formally onboarding members and establishing internal workflows, as detailed in the next step of this guide.

The first decision is determining the membership model. A common and secure approach is a multisig wallet, where a predefined set of signers (e.g., 3-of-5) must approve any transaction. This is implemented using contracts like Gnosis Safe. Alternatively, for more decentralized groups, you can use a token-gated model where membership is granted by holding a specific NFT or ERC-20 token, managed by a registry contract. The choice depends on your need for agility versus broad-based participation.

Once members are defined, you must codify their permissions and roles. This is typically done using an access control system like OpenZeppelin's AccessControl contract. You can create distinct roles such as AUDITOR_ROLE, SECURITY_LEAD_ROLE, and TREASURY_ROLE. For example, you might grant the AUDITOR_ROLE the permission to post findings to an on-chain report registry, while only the TREASURY_ROLE can execute payments from the group's wallet. This principle of least privilege is critical for security.

Here is a basic Solidity example using OpenZeppelin to set up a SECURITY_LEAD_ROLE:

solidityCopy
import "@openzeppelin/contracts/access/AccessControl.sol";
contract SecurityWorkingGroup is AccessControl {
    bytes32 public constant SECURITY_LEAD_ROLE = keccak256("SECURITY_LEAD_ROLE");
    constructor(address initialLead) {
        _grantRole(DEFAULT_ADMIN_ROLE, msg.sender);
        _grantRole(SECURITY_LEAD_ROLE, initialLead);
    }
    function criticalAction() public onlyRole(SECURITY_LEAD_ROLE) {
        // Action only the security lead can perform
    }
}

The DEFAULT_ADMIN_ROLE (granted to the deployer) can later grant or revoke the SECURITY_LEAD_ROLE to other addresses.

For ongoing governance, integrate a proposal and voting mechanism. Tools like Snapshot for off-chain signaling or Tally for on-chain execution via Governor contracts allow members to vote on adding new members, changing roles, or allocating funds. The voting rules—quorum, voting period, and approval threshold—should be explicitly defined in the smart contract. For a security-focused group, a higher threshold (e.g., 80% approval) for critical changes is advisable.

Finally, document all access controls and processes transparently. The on-chain state provides an immutable record, but a clear off-chain charter or README should outline the membership criteria, role definitions, and proposal lifecycle. This combination of immutable on-chain rules and clear documentation builds trust with both the working group members and the broader protocol community that relies on its audits.

A Security Working Group (SWG) is a cross-functional team responsible for the end-to-end audit lifecycle. Its core members should include the lead smart contract developer, a protocol architect, and a project manager. For complex DeFi protocols, consider adding a dedicated cryptographer or a specialist in the protocol's specific domain (e.g., AMM mechanics, lending logic). The SWG's first task is to create a Security Specification Document. This document outlines the protocol's intended behavior, security assumptions, trusted actors, upgrade mechanisms, and key invariants that must never be broken. It serves as the single source of truth for auditors.

With the specification finalized, the SWG must prepare the codebase for external review. This involves creating comprehensive documentation, including NatSpec comments for all public and external functions, and a detailed README.md in the repository that explains how to set up the environment, run tests, and interact with the contracts. The SWG should also run a suite of automated analysis tools internally before engaging auditors. Tools like Slither for static analysis, Mythril for symbolic execution, and Foundry's forge inspect for visualization can identify common vulnerabilities like reentrancy, integer overflows, and improper access control, allowing the team to fix obvious issues first.

The SWG then selects and manages external audit firms. It's a best practice to engage multiple auditors for critical contracts. The SWG provides the audit firms with the Security Specification Document, the prepared code repository, and access to a dedicated testnet deployment. During the audit period, the SWG acts as the primary point of contact, scheduling regular sync calls to clarify protocol logic and triage findings. All discovered issues must be logged in a Vulnerability Management Tracker (e.g., using GitHub Issues or a dedicated spreadsheet), categorizing each by severity (Critical, High, Medium, Low) and status (Open, In Progress, Resolved, Acknowledged).

Once the audit reports are received, the SWG leads the remediation effort. Every finding, even those deemed informational, must be addressed. For each Critical or High severity issue, the SWG should write a detailed post-mortem explaining the root cause, the fix implemented, and how similar issues will be prevented in the future. After fixes are applied, the code must undergo a re-audit of the changed sections to ensure the vulnerabilities are fully resolved and no new ones were introduced. This cycle continues until the auditors sign off on the final code version.

The final responsibility of the SWG is to prepare for mainnet deployment. This includes creating and verifying the final deployment scripts, ensuring all constructor arguments and initializer parameters are correct, and conducting a deployment dry-run on a testnet. The SWG should also draft a public audit summary for the community, transparently disclosing the scope of the audit, the firms involved, the categories of findings, and the resolution status. This document, often published on the project's blog or GitHub, builds trust by demonstrating a commitment to security rigor. The SWG typically remains active post-launch to oversee bug bounty programs and future upgrades.

Before launching a public program, you must form a Security Working Group (SWG). This is a dedicated team responsible for the entire bug bounty lifecycle. The SWG typically includes core protocol developers, security researchers from your audit partners, and representatives from legal and treasury functions. Their first task is to draft a clear scope and policy, defining which smart contracts, APIs, and frontends are in-scope, the severity classification framework (e.g., using the CVSS scale), and the rules of engagement for white-hat hackers.

The SWG must choose a platform to host the program. Options include specialized platforms like Immunefi or HackerOne, which provide submission workflows, triage assistance, and reputation systems, or a self-hosted solution using a dedicated email/GitHub repository. For on-chain protocols, the policy must explicitly state whether findings on testnets or specific mainnet deployments are eligible. A clear, public policy document builds trust with the security community and sets expectations for response times, typically 24-48 hours for initial acknowledgment.

Once live, the SWG's primary operational duty is triage and validation. When a report is submitted, the SWG must quickly reproduce the issue in a controlled environment (e.g., a forked mainnet using Foundry or Hardhat). They assess the impact, likelihood, and severity to determine the appropriate bounty tier. For example, a critical bug enabling theft of user funds would command the highest reward, while a medium-severity logic flaw might warrant a smaller payout. All communication should be confidential until a fix is deployed.

Funding the bounty pool is a key logistical step. The SWG works with the treasury to allocate funds, which are often held in a multi-signature wallet controlled by SWG members. For major programs, this can be millions of dollars in stablecoins or the protocol's native token. The payout process must be transparent and timely. After validation and mitigation, the SWG executes the payout according to the pre-defined schedule, publicly acknowledging the researcher (if they consent) to build their reputation and incentivize future participation.

Finally, the SWG is responsible for post-mortem and iteration. Every validated bug, especially high-severity ones, should trigger a root-cause analysis. The findings should inform improvements to the development lifecycle, such as adding new invariant tests in Foundry or updating internal audit checklists. The SWG should also regularly review and update the bounty scope and reward amounts based on the protocol's TVL, complexity, and the evolving threat landscape to ensure the program remains competitive and effective.

An incident response plan (IRP) is a formal document that defines the procedures for detecting, responding to, and recovering from a security breach. For a Web3 project, this includes scenarios like a smart contract exploit, governance attack, front-end compromise, or private key leak. The plan should be developed by your Security Working Group and must assign clear roles and responsibilities, such as an Incident Commander, communications lead, technical lead, and legal advisor. It is not a static document; it must be a living framework that evolves with your protocol.

The core of the IRP is a step-by-step playbook. A typical structure follows the NIST Incident Response Lifecycle: Preparation, Detection & Analysis, Containment, Eradication & Recovery, and Post-Incident Activity. For a critical vulnerability in a live contract, the containment phase might involve pausing the protocol via an emergency multisig, while the eradication phase requires deploying and verifying a patched contract. Each step must list specific actions, tools (e.g., block explorers, monitoring dashboards), and communication channels (e.g., a private Signal group, pre-drafted public announcements).

Testing the plan is non-negotiable. Conduct tabletop exercises at least quarterly, simulating realistic attack vectors like a flash loan manipulation or a malicious governance proposal. During these simulations, the working group walks through the IRP step-by-step, discussing decisions and identifying gaps. Questions to pressure-test include: Is our multisig threshold reachable within the exploit timeframe? Do we have pre-approved legal language for a public disclosure? Record all findings and update the plan accordingly. Tools like the SEAL 911 framework provide templates for Web3-specific incident management.

Communication protocols are a major differentiator between controlled response and chaos. The IRP must define internal and external communication strategies. Internally, use encrypted channels for the core team and establish a clear chain of command. Externally, prepare templated announcements for different severity levels. Transparency is key, but timing is critical; the plan should outline when and how to inform users, investors, and the public, often through official Twitter accounts, Discord announcements, and project blogs. Refer to the Crypto Incident Response Framework for community-tested templates.

Finally, integrate the IRP with your broader security stack. Ensure your monitoring and alerting tools (e.g., Forta, Tenderly Alerts) feed directly into your incident response channels. Automate where possible, such as having high-severity Forta alerts trigger a message in a dedicated #alerts Slack channel. Post-incident, conduct a formal retrospective to document lessons learned. This report should detail the root cause, effectiveness of the response, and specific action items to improve the protocol's security posture and the IRP itself, closing the feedback loop.

Forming a security working group is not the end of the process, but the beginning of a structured, proactive security posture. The initial steps—defining a clear charter, recruiting diverse expertise, and establishing communication channels—lay the foundation. The next critical phase is operationalization. This involves scheduling the first official meeting to ratify the charter, assign initial roles, and prioritize the backlog of security concerns identified during the project's audit history or recent incident reports. Tools like a shared risk register or a dedicated channel in Discord/Slack should be activated for day-to-day coordination.

For the working group to be effective, it must integrate with existing development workflows. A key next step is to formalize the security review gate in the project's release lifecycle. This could mean requiring a lightweight threat model review for all new smart contract deployments or mandating that major protocol upgrades receive sign-off from at least two working group members before mainnet deployment. Establishing these checkpoints ensures security is considered by default, not as an afterthought. Documenting these processes in the project's GitHub repository or Notion page creates transparency and a reference for all contributors.

Finally, the group must establish metrics for success and a schedule for continuous review. This includes tracking key performance indicators (KPIs) such as mean time to remediate critical vulnerabilities, coverage of automated security tooling, and frequency of security training for developers. The charter itself should be a living document, reviewed quarterly to assess the group's effectiveness and adapt to new threats, such as those outlined in the Ethereum Foundation's Security Best Practices. By taking these concrete next steps, the working group evolves from a concept into a durable pillar of the project's long-term resilience and trustworthiness.