Introduction

The Bybit hack laid bare a harsh truth about Web2 backends: a single compromised server can lead to millions in losses. This wasn’t a fluke—it’s a glaring symptom of centralized vulnerabilities. Web3 promises decentralization, but without secure computation, it’s doomed to repeat Web2’s mistakes.

Enter Trusted Execution Environments (TEEs)—hardware-based secure zones that keep data encrypted even during processing. Paired with Phala Cloud, TEEs empower developers to build Web3 backends where data confidentiality and code integrity are non-negotiable.

In this guide, we’ll break down how TEEs solve Web2’s security woes, how Phala Cloud delivers a trustless infrastructure, and—most importantly—how you can leverage it to build secure Web3 applications.

Let’s dive in.

Web2’s Security Pitfalls: A Developer’s Nightmare

Web2 backends are fragile by design. Here’s why they fail developers:

1. Censorship Risks: Centralized servers can be shut down or manipulated by authorities or hackers, leaving your app at their mercy.

2. Opaque Execution: You trust providers to run your code correctly, but insiders or compromised software (like the Bybit attacker’s sneaky JavaScript tweak on AWS) can sabotage it.

3. Data Exposure: Encryption stops at rest and in transit—data gets decrypted for processing, opening attack windows.

By leveraging TEE, Web3 backends demand a paradigm where data remains encrypted even during computation and code execution is independently verifiable. See it in action here.

TEEs 101: The Hardware Foundation for Trustless Computing

TEEs (think Intel TDX or AMD SEV) are secure enclaves inside CPUs. Imagine a vault where your code and data live, untouchable by the outside world—even the OS or cloud provider. Here’s what they bring to the table:

• Confidential Computing: Data stays encrypted inside the TEE, safe from prying eyes.

• Remote Attestation (RA): A cryptographic “certificate” proves your code runs in a legit TEE, signed by the CPU maker (e.g., Intel).

• Tamper-Proof Execution: Hackers can’t mess with your logic, even on a compromised machine.

Unlike Web2’s half-baked security, TEEs offer end-to-end encryption and verifiable execution—perfect for Web3’s trustless ethos.

Phala Cloud: Your TEE-Powered Web3 Backend Toolkit

Phala Cloud takes TEEs and wraps them in a decentralized, developer-friendly package. It’s built to deliver secure, verifiable backends without the centralized baggage. Here’s how it works:

Key Architectural Components

1. TEE Worker Nodes
• Run by independent providers on TEE-capable hardware (e.g., Intel TDX)..
• Each node spits out a Remote Attestation report, verifiable via on-chain smart contracts or tools like dcap-qvl.
• You can check what code runs where before trusting it.

2. Trustless Coordination
• Smart contracts manage base image registration, KMS root key verification, user don't need to trust the Cloud provider.
• Even the application code updates can be managed by on-chain governance: new deployments must match hashes approved by governance, preventing unauthorized changes.

3. Phala Cloud built on dstack SDK fundamentals: Modern TEE Abstraction Layer
• Built on dstack, this lets you drop any Docker program into a TEE with minimal fuss, keeping it verifiable.

Building on Phala Cloud: 3 Core Principles

Ready to code? Here’s how Phala Cloud ensures your Web3 backend is secure by design:

Data Confidentiality by Default

• Encrypted Communication: End-to-end encryption between users and backend inside TEE, the root-of-trust comes from RA report.

• In-Enclave Processing: Sensitive operations (e.g., key management, financial transactions) occur entirely inside the TEE.

2. Remote Attestation: Proving Trustworthiness

• RA Workflow:
• A user requests a RA report from a TEE worker.
• The report includes a hash of the enclave’s code and a digital signature from the CPU manufacturer (e.g., Intel).
• The user verifies the report against a trusted registry (e.g., Phala’s on-chain registry).

• Why This Matters: RA replaces blind trust with cryptographic proof that code is unmodified and runs in a genuine TEE.

Real-World Wins: What You Can Build

Phala Cloud isn’t just theory—it solves problems developers face daily. Here are three killer use cases:

1. Secure Private Key Management

• Problem: Centralized exchanges get hacked, losing user funds.

• Solution: Generate and store keys in TEEs, sign transactions in-enclave. Check the Create Crypto Wallet guide for a step-by-step.

• Win: RA proves keys never leave the TEE.

2. Confidential DeFi Transactions

• Problem: Front-running and MEV plague transparent blockchains.

• Solution: Encrypt and match orders in TEEs, hiding intent until execution. See how Flashbots uses TEEs for Ethereum blocks building here.

• Win: Fair trades, guaranteed by RA.

3. Privacy-First Identity Verification

• Problem: KYC exposes user data to third parties.

• Solution: Verify data in TEEs without sharing raw info—even with app devs.

• Win: Privacy meets compliance.

Phala Cloud vs. Traditional Clouds: A No-Brainer

Phala Cloud’s decentralized trust and hardware-enforced security blow traditional clouds out of the water for Web3.

Get Started: Your Developer Roadmap

Building a secure Web3 backend is easier than you think with Phala Cloud. Here’s how to jump in:

1. Migrate an Existing App: Follow the migration guide to TEE-ify your backend.

2. Start Fresh with Templates: Grab a pre-built base from templates—think wallets or DeFi protocols.

3. Master the dstack SDK: Dig into the dstack repo for TEE integration details.

Conclusion: Secure Web3 Starts Here

The Bybit hack wasn’t just a security fail—it was an architecture fail. Phala Cloud fixes that with TEEs and Web3 principles, delivering backends where:

• Data breaches can’t happen (it’s never exposed).

• Trust is proven, not assumed (thanks, RA).

• Security is hardware-deep, not a bolted-on afterthought.

For Web3 developers, Phala Cloud is your foundation for building apps that last. Ready to start?

• Check the Phala Cloud Docs.

• Join the community: 🌍 Global, 🇨🇳 Chinese.

• Explore live projects on the Explorer.

In Web3, security isn’t optional—it’s everything. Build it right with Phala Cloud.