Red team exercises: how projects test their own defences in 2025

Explore red team exercises, why they’re vital for crypto security, and how they help projects safeguard users. Learn real-world examples and practical takeaways.

What red team exercises are and why they matter now.
The core mechanisms behind testing project defences.
Real‑world use cases, including RWA platforms like Eden RWA.
Risks, regulation, and what to watch for in 2025.

In the fast‑moving world of blockchain, a single vulnerability can expose millions of dollars. Red team exercises—structured, adversarial tests that simulate real attacks—have become an industry standard for projects seeking to prove their resilience. In 2025, with heightened regulatory scrutiny and increasingly sophisticated threat actors, these drills are not optional; they’re essential.

Red team exercises differ from routine security audits in that they adopt the mindset of a malicious actor, probing every layer—from smart contracts and on‑chain logic to off‑chain infrastructure and human factors. This approach uncovers hidden weaknesses that static reviews may miss, providing valuable insights before an attack occurs.

For retail investors navigating crypto and real‑world asset (RWA) platforms, understanding how projects defend themselves is critical. Knowing that a protocol has undergone rigorous red teaming can add confidence—and also reveal potential blind spots to avoid.

Background and Context

Red team exercises originated in military and corporate security circles as a way to challenge defensive assumptions. In the blockchain era, they serve a similar purpose: testing whether code, architecture, and processes withstand targeted attacks. The concept gained traction after high‑profile incidents such as the 2021 Poly Network hack, which exposed gaps that automated audits alone could not detect.

Key players in the crypto ecosystem now routinely engage external security firms—like Quantstamp, Trail of Bits, or ConsenSys Diligence—to conduct red team assessments. These firms bring specialized expertise and a fresh perspective, often revealing novel attack vectors such as flash loan amplification, oracle manipulation, or social‑engineering on governance platforms.

Regulators, too, are paying attention. The European Union’s Markets in Crypto‑Assets Regulation (MiCA) encourages “robust risk management frameworks,” while the U.S. Securities and Exchange Commission (SEC) has issued guidance that emphasizes security best practices for securities token offerings. In this environment, red team exercises are increasingly viewed as a compliance metric.

How Red team exercises test project defences

The process is systematic, typically following these core steps:

Scope definition: The client and the security firm agree on what assets (smart contracts, oracles, APIs) will be tested, as well as any constraints.
Threat modeling: Red team members map potential adversaries—individual hackers, botnets, institutional actors—and their capabilities.

Exploit development: Attackers craft realistic payloads that exploit identified weaknesses, often leveraging publicly available tools or custom scripts.

Execution: The team actively attempts to breach the system while monitoring logs and performance metrics.

Analysis & reporting: Findings are documented with severity ratings, evidence (e.g., transaction hashes), and remediation recommendations.

This methodology engages multiple actors:

Issuers / project teams provide access to test environments and respond to findings.
Custodians safeguard off‑chain assets, ensuring that any breach does not compromise user funds.
Investors review results before committing capital; transparency here builds trust.

Regulators may require public disclosure of major vulnerabilities as part of compliance.

Market Impact & Use Cases

Red team exercises have tangible effects on both projects and users. For developers, they surface hard-to‑spot bugs—such as reentrancy attacks or flawed access controls—that could otherwise lead to catastrophic losses. For investors, the audit trail provides a risk assessment metric that can be compared across platforms.

Model	Traditional Security Audit	Red Team Exercise
Scope	Code review, static analysis	Adversarial simulation, live attack attempts
Perspective	Defender’s view	Mimics attacker’s tactics
Outcome	Vulnerability list with severity scores	Comprehensive exploit scenarios and mitigation strategies
Relevance to regulators	Compliance evidence	Demonstrates proactive risk management

Typical use cases include:

DeFi protocols: Testing flash loan attack vectors on liquidity pools.
RWA platforms: Assessing the security of tokenized real‑estate smart contracts and off‑chain asset custody.
Layer‑1 chains: Evaluating validator node software against denial‑of‑service attacks.

Risks, Regulation & Challenges

Despite their benefits, red team exercises present several challenges:

Cost and resource intensity: High‑quality assessments can cost $50k–$200k for large protocols.
Scope creep: Projects may inadvertently expose sensitive data or live funds during testing if not isolated properly.
Regulatory ambiguity: While MiCA encourages robust risk management, the SEC has yet to codify specific red‑team requirements.
Smart contract volatility: Even after remediation, new code deployments can reintroduce vulnerabilities.
Human factor risks: Social engineering remains a weak link; red teams often test for phishing or impersonation attacks on governance platforms.

A realistic negative scenario would involve a red team discovering an exploit that is not patched before the protocol goes live, leading to a high‑profile hack. Conversely, a well‑executed exercise can prevent such incidents and reinforce user confidence.

Outlook & Scenarios for 2025+

Looking ahead, several trends are shaping red team adoption:

Bullish scenario: Regulatory clarity forces all tokenized asset platforms to publish red‑team reports, creating a new compliance benchmark. Projects that lead in transparency attract more institutional capital.
Bearish scenario: A major hack occurs because a protocol bypasses red‑team testing due to cost or timeline pressures, eroding trust across the sector and prompting stricter regulatory mandates.
Base case: Adoption continues at a steady pace; high‑profile projects routinely publish findings while smaller protocols adopt incremental testing as budgets allow. Investors become more discerning, favoring platforms with publicly available red‑team evidence.

For builders, the implication is clear: integrate red team exercises into the development lifecycle rather than treating them as an afterthought. For investors, reading the red‑team report should be a standard part of due diligence.

Eden RWA – A concrete example of security in action

Eden RWA is an investment platform that democratizes access to French Caribbean luxury real estate through tokenized, income‑generating properties. The platform operates by issuing ERC‑20 property tokens that represent indirect shares of a dedicated Special Purpose Vehicle (SPV) – typically structured as an SCI or SAS – owning a carefully selected villa in Saint‑Barthélemy, Saint‑Martin, Guadeloupe, or Martinique.

Key features include:

Smart contract automation: Rental income is paid out in USDC directly to investors’ Ethereum wallets via auditable contracts.
P2P marketplace: An in‑house secondary market facilitates primary and secondary token trades, with liquidity provisions scheduled for a forthcoming compliant platform.
DAO‑light governance: Token holders vote on major decisions—renovations, sale timing, or usage—while an $EDEN utility token incentivizes participation.
Experiential layer: Quarterly bailiff‑certified draws allow a randomly selected token holder to stay in the villa for one week, adding tangible value beyond passive income.

Eden RWA’s security posture demonstrates why red team exercises are critical. The platform must protect not only smart contracts but also real‑world asset custody, cross‑border regulatory compliance, and user data privacy. By engaging independent security firms to conduct red team assessments of its token issuance logic, oracle feeds, and custodial integrations, Eden RWA can validate that its architecture withstands realistic attack scenarios.

If you’re interested in exploring a tokenized real‑estate investment that prioritises transparency and security, you may wish to learn more about Eden RWA’s presale. Explore the presale or join the presale page. These links provide further details on tokenomics, governance, and how the platform aligns investor interests with asset performance.

Practical Takeaways

Always verify whether a protocol has undergone a recent red team exercise.
Check for publicly released findings—severity scores, exploit proofs, and remediation status.
Monitor the frequency of security updates; regular patches signal active risk management.
Understand the scope of testing: does it cover on‑chain contracts, oracles, off‑chain APIs, and custodial services?
Consider regulatory context—MiCA in Europe or SEC guidance in the U.S.—to gauge compliance expectations.
Assess governance structures: DAO‑light models may reduce friction but also introduce new attack vectors.
Look for third‑party attestations (e.g., from auditors like Trail of Bits) that add credibility.

Mini FAQ

What is a red team exercise?

A structured, adversarial security assessment where independent experts simulate real attacks to uncover vulnerabilities in smart contracts, infrastructure, and human processes.

How often should projects conduct red team tests?

Ideally after major code changes or upgrades. Many protocols schedule semi‑annual reviews or trigger assessments upon reaching critical milestones.

Can a red team exercise replace a traditional audit?

No, it complements audits by adding an attacker’s perspective. Audits focus on code correctness; red teams test exploitability and operational resilience.

What does the “DAO‑light” governance model mean for security?

It balances efficiency with community oversight but may reduce the number of checks before proposals pass, increasing the importance of robust smart contract design.

Is there a regulatory requirement to perform red team testing?

Currently, no explicit mandate exists, but regulators increasingly view thorough security practices—including red teaming—as part of due diligence for compliance under MiCA and SEC guidance.

Conclusion

Red team exercises have moved from niche practice to essential component of a mature crypto ecosystem. By actively simulating attacker behaviour, projects uncover hidden risks that static reviews miss, thereby protecting users, capital, and reputation. In 2025, with regulatory frameworks tightening and threat actors growing more sophisticated, the ability to demonstrate robust defensive testing will differentiate leading platforms.

Real‑world examples like Eden RWA show how tokenized real‑estate projects can integrate rigorous security assessment into their operational model while still delivering attractive yield and governance participation. Investors who prioritize protocols with transparent red team findings are better positioned to navigate an increasingly complex risk landscape.

Disclaimer

This article is for informational purposes only and does not constitute investment, legal, or tax advice. Always do your own research before making financial decisions.