Hedgey's Security Innovation: Building the Next-Generation Smart Contract Defense Stack
"Security has to start with developers—and it has to be continuous."
Alex Michelsen, Founder and CFO of Hedgey Finance, is building what modern smart contract security actually looks like. His token infrastructure platform now operates one of the most comprehensive security architectures in Web3, representing a new paradigm for how protocols approach cybersecurity.
Hedgey's evolution from traditional audit-dependent security to proactive, multi-layered defense demonstrates what's possible when teams commit to security innovation. Their approach is becoming the blueprint for enterprise-grade Web3 security.
The Catalyst for Innovation
In April 2024, Hedgey experienced a sophisticated exploit that targeted a subtle logic flaw in their campaign management system. The attack exploited an approval persistence vulnerability; a new class of attack that existing security methodologies hadn't adapted to catch.
Rather than viewing this as a setback, Michelsen and his team used it as a catalyst for comprehensive security innovation. "It's a much bigger undertaking," he explains. "We're moving into a multi-framework approach and doing internal self-audits with advanced tools before even going to external auditors."
The result is a security architecture that's more robust, more comprehensive, and more forward-thinking than anything they had previously implemented.
The Five-Layer Security Architecture
Hedgey's new security stack represents the state-of-the-art in smart contract protection:
Layer 1: Developer-Integrated Security
AI-Powered Analysis with Olympix: Advanced static analysis, mutation testing, and automated unit test generation integrated directly into the development workflow. This catches vulnerabilities during coding, not during audits.
Adversarial Fuzzing: Systematic exploration of attack paths using AI-generated test cases. When Hedgey's contracts were analyzed with Olympix, the system generated 3,371 test cases and successfully identified the exact attack vector that had been missed by traditional reviews.
Internal Red Teaming: "Role playing as a black hat to attempt to self hack during testing." The development team actively thinks like attackers, probing their own systems for weaknesses.
Layer 2: Comprehensive External Validation
Multiple Independent Audits: Three private audits plus one public audit via Code4rena. Different firms bring different methodologies and perspectives, creating comprehensive coverage.
Diverse Audit Approaches: Each audit firm specializes in different aspects—some focus on formal verification, others on economic modeling, others on novel attack vectors.
Layer 3: Real-Time Protection
Advanced Monitoring: Partnership with Cube3 and Fuzzland for fraud prevention and anomaly detection. Security doesn't stop at deployment—it continues throughout the contract's lifetime.
Automated Response Systems: Real-time detection and response capabilities that can identify and mitigate attacks as they occur.
Layer 4: Continuous Evolution
Regular Security Reviews: Ongoing assessment of deployed contracts against newly discovered attack vectors and vulnerabilities.
Adaptive Defense: Security measures that evolve with the threat landscape, incorporating new attack patterns and defense mechanisms as they emerge.
Layer 5: Security-First Culture
Developer Security Training: Team-wide education on secure coding practices, attack methodologies, and defense strategies.
Security Integration: Security considerations built into every aspect of the development process, from initial design to final deployment.
The Technology Innovation
Hedgey's adoption of next-generation security tools represents a significant technological leap. Their integration of AI-powered analysis tools allows them to:
Catch Previously Undetectable Vulnerabilities: Logic flaws that emerge from function interactions, not individual function bugs.
Validate Test Suite Effectiveness: Mutation testing ensures their tests actually catch malicious changes, not just confirm expected behavior.
Automate Attack Simulation: Systematic exploration of all possible attack paths, not just the ones humans can imagine.
Generate Proof-of-Exploit: Automatic generation of working exploit code for any vulnerabilities found, proving they're real risks, not theoretical concerns.
The Business Impact
This comprehensive security approach delivers measurable business value:
Faster Development Cycles: Catching vulnerabilities early in development eliminates costly late-stage fixes and re-audits.
Higher Audit Efficiency: External auditors can focus on architectural review and novel attack vectors rather than catching basic vulnerabilities.
Stronger User Confidence: Demonstrable security rigor builds trust with users and partners.
Competitive Advantage: Superior security becomes a differentiating factor in a crowded market.
Risk Mitigation: Comprehensive protection against both known and unknown attack vectors.
Leading the Industry Forward
Hedgey's approach is influencing how the broader Web3 ecosystem thinks about security. Their methodology demonstrates several key principles:
Security as Infrastructure: Treating security tools and processes as fundamental infrastructure, not optional add-ons.
Proactive vs. Reactive: Preventing vulnerabilities during development rather than detecting them after deployment.
Layered Defense: Multiple independent security measures that provide redundant protection.
Continuous Improvement: Security as an ongoing practice that evolves with new threats and capabilities.
Developer Empowerment: Giving developers the tools and knowledge to build secure systems from the ground up.
The ROI of Advanced Security
Michelsen's investment in comprehensive security pays dividends across multiple dimensions:
Cost Efficiency: "I would have a much higher budget" doesn't mean higher total costs—it means strategic investment in prevention rather than remediation.
Development Velocity: Automated security analysis accelerates development by providing immediate feedback and reducing audit cycles.
Market Position: Best-in-class security becomes a competitive moat in an industry where trust is paramount.
Team Confidence: Developers can ship with confidence knowing their code has been thoroughly validated.
Ecosystem Leadership: Hedgey's approach influences partners, users, and the broader community to adopt higher security standards.
Practical Implementation Insights
For teams looking to implement similar security innovations, Hedgey's experience offers valuable lessons:
Start with Developer Tools: Integrate security analysis directly into the development environment where it can have immediate impact.
Invest in Team Education: Security isn't just about tools—it's about mindset and methodology.
Plan for Iteration: Security architecture should evolve as threats and capabilities advance.
Measure and Optimize: Track security metrics and continuously improve processes based on results.
Build Security Partnerships: Work with leading security firms and tool providers to stay at the forefront of capabilities.
The Future of Smart Contract Security
Hedgey's security architecture represents what enterprise-grade Web3 security looks like. Their approach demonstrates that:
Automation amplifies human expertise rather than replacing it
Multiple security layers provide robust protection against diverse attack vectors
Developer-integrated security catches more vulnerabilities than post-development reviews
Continuous security practices adapt to evolving threats
Investment in security innovation provides measurable business value
Setting the Standard
"Security isn't a checkbox. It's a lifecycle," Michelsen concludes. This philosophy drives Hedgey's comprehensive approach and represents the mindset shift that's defining the next generation of Web3 infrastructure.
Teams that adopt this approach are building more resilient systems, shipping with greater confidence, and establishing competitive advantages in security-conscious markets. Hedgey's innovation demonstrates that comprehensive security isn't just possible—it's practical, cost-effective, and strategically valuable.
The future of smart contract security is proactive, automated, and comprehensive. Hedgey is building it today.
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Follow-up: Conduct a follow-up review to ensure that the remediation steps were effective and that the smart contract is now secure.
Follow-up: Conduct a follow-up review to ensure that the remediation steps were effective and that the smart contract is now secure.
In Brief
Remitano suffered a $2.7M loss due to a private key compromise.
GAMBL’s recommendation system was exploited.
DAppSocial lost $530K due to a logic vulnerability.
Rocketswap’s private keys were inadvertently deployed on the server.
Hacks
Hacks Analysis
Huobi | Amount Lost: $8M
On September 24th, the Huobi Global exploit on the Ethereum Mainnet resulted in a $8 million loss due to the compromise of private keys. The attacker executed the attack in a single transaction by sending 4,999 ETH to a malicious contract. The attacker then created a second malicious contract and transferred 1,001 ETH to this new contract. Huobi has since confirmed that they have identified the attacker and has extended an offer of a 5% white hat bounty reward if the funds are returned to the exchange.
