Launching a Platform with a Defined Incident Response Playbook

Prediction markets operate with significant financial stakes and real-time, on-chain logic. Unlike traditional web applications, a bug in a MarketFactory contract or an oracle failure can lead to irreversible fund loss within minutes. An incident response plan is a predefined, actionable protocol that your team executes when a critical vulnerability, exploit, or system failure is detected. Its primary goal is to contain damage, protect user funds, and restore normal operations with minimal downtime. Without one, teams waste precious time debating procedures while an attacker drains the treasury.

The core of the plan is a clear severity classification matrix. This defines what constitutes a P0 (Critical), P1 (High), or P2 (Medium) incident. For example, a P0 incident might be an active exploit draining funds from a live market contract, requiring immediate pausing via an admin function or upgrade. A P1 could be a frontend compromise redirecting to a phishing site. Each classification triggers specific, pre-authorized actions and communication protocols, removing ambiguity during a crisis.

Your plan must detail technical escalation paths and tooling. This includes: - A secure, off-chain list of multi-sig signers and their contact information. - Pre-deployed and tested emergency pause mechanisms for core contracts. - Pre-written transaction calldata for common mitigation steps (e.g., pausing a specific market). - Access to forked mainnet environments (using tools like Foundry's anvil or Hardhat Network) to simulate and verify response actions before broadcasting them. This preparation turns a chaotic scramble into a controlled execution.

Communication is equally critical. The plan should outline stakeholder notification procedures. This includes internal team alerts via dedicated channels (e.g., PagerDuty, Telegram crisis group), transparent user notifications via Twitter/Discord status pages, and, if necessary, coordination with security partners like OpenZeppelin or Chainalysis. A template for public disclosure posts should be prepared in advance, balancing transparency with the need to avoid tipping off an attacker during active mitigation.

Finally, a post-mortem and improvement process is mandatory. After resolving an incident, the team must conduct a blameless retrospective to document the root cause, timeline, effectiveness of the response, and specific technical changes to prevent recurrence. This could mean adding new circuit breakers, improving monitoring with services like Tenderly or Forta, or revising the contract upgrade process. This cycle transforms a security failure into a permanent strengthening of the platform's defenses.

The first prerequisite is instrumentation and monitoring. You cannot respond to what you cannot see. This requires implementing robust on-chain and off-chain monitoring. For on-chain activity, use services like Chainalysis, TRM Labs, or OpenZeppelin Defender to track suspicious transactions, wallet interactions, and contract deployments. Off-chain, integrate monitoring for your application's backend, API endpoints, and frontend to detect DDoS attacks, unauthorized access, or data breaches. All alerts should funnel into a centralized system like PagerDuty, Opsgenie, or a dedicated Discord/Slack channel with proper access controls.

Next, establish clear communication protocols and access control. Define exactly who needs to be notified at each severity level (e.g., Sev-1: protocol exploit). Create a verified contact list with backups, specifying primary communication channels (e.g., Signal, Telegram) and fallbacks. Simultaneously, implement and document privileged access management. This includes securing private keys for admin functions, multi-sig wallets (using Gnosis Safe or Safe{Wallet}), and infrastructure credentials. Ensure at least two team members can access critical systems, but never store secrets in plaintext or shared documents.

Finally, conduct a threat modeling and asset inventory exercise. You must know what you're protecting. Catalog all critical assets: - Smart contracts with admin functions - Treasury wallets and their approval limits - Oracle dependencies (e.g., Chainlink) - Bridge contracts for cross-chain assets - Frontend domains and hosting providers. For each asset, identify potential threat vectors using frameworks like STRIDE (Spoofing, Tampering, Repudiation, Information Disclosure, Denial of Service, Elevation of Privilege). This structured analysis directly informs the specific incident scenarios your playbook will address.

The Incident Response Team (IRT) is a cross-functional group assembled to manage security events. Its primary objective is to contain damage, restore normal operations, and learn from the incident. A pre-defined structure prevents chaotic decision-making during high-pressure situations. For a blockchain platform, this team must include members with expertise in smart contract security, node operations, frontend engineering, communications, and legal/compliance. Assigning these roles in advance ensures the right person is activated immediately when an alert is triggered.

Clearly delineate the Chain of Command and Decision-Making Authority. Designate an Incident Commander (IC) who has the ultimate authority to execute the response plan. This role is typically filled by a senior engineering or security lead. The IC is responsible for declaring an incident, activating the team, and making critical calls like pausing contracts or initiating a fork. Supporting roles include Technical Leads for on-chain and off-chain systems, a Communications Lead to manage internal and external messaging, and a Coordinator to log all actions and evidence. Use a RACI matrix (Responsible, Accountable, Consulted, Informed) to clarify expectations.

Establish Communication Protocols and Escalation Paths. Define primary and secondary communication channels (e.g., a dedicated encrypted chat room, phone tree) that are separate from everyday tools. Specify how and when to escalate an issue from automated monitoring to the IRT, and from the IRT to executive leadership or external parties like auditors and legal counsel. For example, a Severity 1 incident involving active fund drainage would trigger an immediate, all-hands response, while a Severity 3 configuration issue might follow a standard ticketing process. Document these thresholds clearly in the playbook.

Integrate the IRT structure with your platform's technical architecture. The smart contract lead must have pre-approved multisig permissions or administrative keys to execute emergency pauses in protocols like OpenZeppelin's Pausable contract. The node operations lead should have documented procedures for halting validators or sequencers. Practice these procedures in a testnet environment. Tools like Slither or Foundry can be used to simulate exploit scenarios, allowing the team to rehevestigate and respond in a controlled setting, refining both technical and communication workflows.

Finally, define post-incident responsibilities. The IRT's work isn't done when the immediate threat is neutralized. The Technical Lead oversees forensic analysis using blockchain explorers like Etherscan and Tenderly to trace transactions. The Communications Lead manages disclosure timelines, coordinating with platforms like DeFiLlama to update TVL figures or issuing public statements. The IC ensures a blameless post-mortem is conducted, resulting in actionable recommendations to update smart contracts, monitoring rules, and the playbook itself. This closes the feedback loop, transforming a reactive response into proactive resilience.

Effective incident response begins with detection. A Web3 platform must implement a multi-layered monitoring strategy. This includes on-chain monitoring for suspicious transaction patterns (e.g., flash loan attacks, abnormal token movements) using services like Forta, Tenderly, or custom indexers. It also requires off-chain monitoring of system health, API endpoints, and social channels for reports of phishing or platform compromise. Automated alerts should be configured to trigger based on predefined heuristics, such as a sudden 50% drop in TVL or failed contract calls exceeding a threshold.

Once an alert fires, you need a clear framework to assess its impact. A severity classification matrix is essential. Common classifications are Critical (active exploit causing fund loss), High (vulnerability with high likelihood of exploitation), Medium (non-critical bug or performance issue), and Low (minor UI bug). For example, a reentrancy vulnerability in a live vault would be Critical, while a frontend display error showing incorrect APY might be Low. This classification dictates your response timeline, communication strategy, and resource allocation.

Your playbook must document the specific criteria for each severity level. For a Critical incident, indicators may include: unauthorized minting of protocol tokens, draining of a liquidity pool, or a governance takeover. A High severity issue could be a discovered vulnerability in a recently audited contract that is not yet exploited. Documenting these criteria removes ambiguity during a crisis, allowing the response team to quickly triage the alert and escalate appropriately without debate. This process is often formalized in an Incident Severity Policy document.

Integrate these detection and classification steps into your operational runbooks. Define clear roles and responsibilities: who is on-call, who has the authority to declare a severity level, and who can pause contracts. Use tools like PagerDuty or Opsgenie to manage alert routing. For transparency, consider publishing a summarized version of your severity framework for users, as seen in protocols like Compound or Aave. This demonstrates a proactive security posture and manages community expectations regarding incident response times and communication.

A documented mitigation procedure is a step-by-step technical guide for your team to execute during a crisis. It moves beyond general strategy ("pause the protocol") to specific, auditable actions ("call function pause() on contract 0x123... with admin key 0xabc..."). This eliminates ambiguity and reduces response time. For each identified threat scenario—like a price oracle manipulation or a governance attack—you should have a corresponding procedure. These documents must be version-controlled, accessible offline, and regularly tested in staging environments to ensure they work as intended.

Effective procedures are modular and role-specific. A typical structure includes: 1. Trigger Conditions: The specific on-chain events or off-chain alerts that initiate this playbook. 2. Immediate Actions: The first technical steps, such as pausing vulnerable contracts or disabling specific functions. 3. Verification Steps: Commands to confirm the mitigation was successful (e.g., checking contract state via cast call). 4. Escalation Paths: When and how to involve external parties like a multisig council or a blockchain security firm. Use tools like Foundry's cast and forge for Ethereum-based examples, providing the exact command syntax.

For a concrete example, consider a procedure for responding to a suspicious large withdrawal from a vault. The technical steps might include:

bashCopy
# 1. Verify the alert by checking the last transaction
cast call <VAULT_ADDRESS> "balanceOf(address)(uint256)" <SUSPECT_ADDRESS> --rpc-url $RPC_URL

# 2. If confirmed, pause withdrawals by invoking the emergency pause function
cast send <VAULT_ADDRESS> "pause()" --private-key $EMERGENCY_KEY --rpc-url $RPC_URL

# 3. Verify the contract is paused
cast call <VAULT_ADDRESS> "paused()(bool)" --rpc-url $RPC_URL

This scripted approach ensures consistency and speed. Store private keys and RPC URLs securely using environment variables or dedicated secret management tools.

Integrate these procedures with your monitoring stack. Use alerting systems like OpenZeppelin Defender Sentinels or Tenderly Alerting to automatically trigger the initial steps of a playbook or notify the on-call engineer with the relevant procedure link. Furthermore, document post-mortem steps within each procedure: how to snapshot the chain state for analysis, preserve transaction hashes, and initiate the upgrade or patch process. This creates a closed-loop system where every incident directly improves your protocol's resilience and your team's preparedness for future events.

A communication protocol is a predefined plan detailing who needs to know what, when, and how during a security incident. It separates internal coordination from external disclosure, preventing panic and misinformation. Internally, this means establishing clear channels (e.g., a dedicated Slack/Telegram war room, PagerDuty alerts) and a RACI matrix (Responsible, Accountable, Consulted, Informed) for your response team. Externally, it governs communication with users, investors, partners, and the public, often through official blog posts or social media channels.

Your internal protocol must activate immediately upon incident detection. The first alert should go to the on-call engineer and security lead, who then escalate based on severity. Use templated messages in your incident management tool (like Jira Service Management or Zendesk) to save time. For example, a SEV-1 template would auto-populate with required actions: "Isolate affected subsystems, begin forensic data collection, convene core response team within 15 minutes." This ensures a consistent, rapid response regardless of who is on duty.

External communication requires careful legal and strategic planning. Transparency is key, but premature or inaccurate statements can cause more harm. Prepare draft templates for different scenarios (e.g., protocol exploit, front-end compromise, data leak) that can be quickly adapted. These should follow a standard structure: Acknowledgement of the issue, Impact assessment (what systems/users are affected), Actions taken, User guidance, and a Timeline for updates. For major incidents, coordinate statements with legal counsel to navigate regulatory obligations in relevant jurisdictions.

A critical component is the post-mortem communication. After resolving the incident, publish a detailed, blameless analysis. This should include the root cause, timeline, corrective actions taken, and measures to prevent recurrence. Platforms like Immunefi and DeFi Safety have set a high standard for these reports. Sharing this publicly, as projects like Euler Finance and Polygon did after major hacks, rebuilds trust by demonstrating accountability and a commitment to improving security for the entire ecosystem.

A structured post-mortem is a formal, blameless process conducted after a security incident or major service outage is resolved. Its primary goal is not to assign fault, but to understand the root cause, document the timeline, and identify actionable improvements to prevent recurrence. For a Web3 platform, this analysis is crucial for maintaining user trust and protocol integrity. The process should be initiated within 48 hours of incident resolution while details are fresh, involving key responders from engineering, security, and product teams.

The analysis should document a clear timeline, answering the Five Whys to drill down from the symptom to the fundamental cause. For example: Why did the bridge halt? A validator signature was missing. Why was it missing? The node was offline. Why was it offline? An automated upgrade script failed. Why did it fail? The script lacked error handling for insufficient gas. This method moves past surface-level fixes to address systemic issues in code, processes, or architecture.

The final, actionable output is a post-mortem report. This document should include: the incident's impact (e.g., "$2M in transactions delayed for 4 hours"), the complete timeline, the root cause, and, most importantly, a list of follow-up action items. Each item must have a clear owner and deadline. Examples include: "Add circuit breaker to bridge contract by Q3," "Implement node health dashboard for validators," or "Update incident runbook with new mitigation step."

To institutionalize learning, the report should be shared internally and, when appropriate, with the community via a transparency blog post. Tools like Jira, Linear, or GitHub Issues can track action items to closure. Regularly reviewing past post-mortems in team meetings helps identify recurring patterns and reinforces a culture of continuous improvement and resilience, which is non-negotiable for operating critical Web3 infrastructure.

An incident response (IR) plan is a living document. After the initial launch of your platform, you must establish a maintenance cadence. Schedule a quarterly review to audit the plan against current threats, such as new smart contract vulnerabilities (e.g., reentrancy variants like cross-function), changes in your tech stack (e.g., upgrading from Hardhat to Foundry), and shifts in the regulatory landscape. Assign an owner for each section of the playbook and use version control (like Git) to track changes, ensuring everyone operates from the latest iteration.

Tabletop exercises are the cornerstone of effective testing. These are facilitated discussions where your core team walks through a simulated incident scenario. For example, present a scenario where a critical vulnerability is discovered in a live PoolFactory contract. The exercise should test communication protocols (who declares the incident on Discord?), decision-making (do you pause the protocol or deploy a patch?), and technical execution (how is the emergency multisig transaction structured?). Document gaps and action items from each session.

For technical validation, integrate automated testing into your development lifecycle. Use tools like Slither or Mythril to run static analysis on new code commits, automatically checking for common vulnerabilities. Implement and regularly run invariant tests using a framework like Foundry's forge, which can simulate attacks on your system's core logic (e.g., "the total supply of tokens must never decrease"). These tests provide continuous assurance that your codebase adheres to the security assumptions in your IR plan.

Communication channels and tooling must be tested under load. Conduct a drill where you activate your incident war room (e.g., a dedicated Telegram group or Warpcast channel) and execute key steps from your playbook. Verify that on-call alerting (via PagerDuty or OpsGenie) works, that blockchain monitoring tools (like Tenderly or Blocknative) are accessible, and that your team can quickly deploy to a forked testnet using tools like Anvil. This uncovers procedural friction before a real crisis.

Finally, incorporate post-incident analysis into your maintenance cycle. After any real incident or major drill, conduct a formal retrospective. Publish a report detailing the timeline, root cause, effectiveness of the response, and specific improvements to the playbook. This practice, inspired by Google's SRE culture, transforms incidents into lessons that proactively strengthen your protocol's security posture and operational resilience over time.