Understanding Smart Contract Security Audits
Basics
The results of a smart contract code review often influence investments made in blockchain projects. This is why security audits of smart contracts are commonplace in the Decentralized Finance (DeFi) ecosystem.
Understanding the importance of cybersecurity audits is essential for making wise and informed decisions.
Smart-Contract Audit
A security audit of a smart contract typically involves four steps. It is done to thoroughly examine and comment on the project's written smart contract code (often in Solidity programming language) provided through GitHub. Such audits are essential for DeFi projects that anticipate massive blockchain transactions worth millions of dollars and expect to engage many players.
1)The audit team performs an initial analysis of the smart contracts.
2)The audit team presents their findings to the project team so they may take action.
3)The project team alters and adjusts the project based on the identified issues.
4)The audit team publishes its final report, considering any unresolved revisions or errors.
A smart contract audit is now considered obligatory for new DeFi projects wishing to attract crypto users and be perceived as reputable. Certain audit providers are considered authorities in the field, which further strengthens the value of their audits in the eyes of investors.
What Is the Use of Smart Contract Audit?
We need smart contract audits to ensure the security of a distributed ledger and verify that the code of a smart contract is functioning as intended. Audits can identify potential vulnerabilities and guarantee that the code meets all standards and requirements.
Smart contracts are precious assets, given that vast sums of money can be transacted or stored. But this also makes them targets for malicious hacks, where even a small coding error can cause significant losses. A prime example is the DAO hack on Ethereum, wherein around $60 million of ETH was stolen, so much so that the Ethereum network had to be hard forked to mitigate the losses.
Since blockchain transactions cannot be reversed, developers must ensure their projects have secure code. Blockchain technology is incredibly secure, meaning retrieving funds or addressing issues that arise afterward is impossible. As a precaution, all sources of vulnerability must be eliminated right away.
How Does It Work?
Regardless of the audit provider, a standard process for auditing a smart contract can generally be expected. Even though the audits may vary in certain aspects, there is a standard sequence of steps that usually takes place:
- Analyze the project's scope. It includes the smart contract, project goals, and overall architecture to properly assess the project's specifications and write the code accordingly.
- Provide an estimate for the amount of work required.
- Test the system. The tests may vary depending on the auditing team, analysis tools, and methods utilized. Generally, manual and automated tests should be conducted.
- Produce an initial version of the report indicating the errors present, and share it with the project team for their evaluation and necessary corrections.
- After taking into account any steps the team has taken to address the observed issues, distribute the completed report.
Smart Contracts Audit Methods
Gas Efficiency
When auditing smart contracts, it's not just about ensuring blockchain security. Auditors also scrutinize efficiency and optimization to reduce transaction costs. Complex transactions can be expensive on networks such as Ethereum, where gas fees are relatively high. Therefore, efficient contracts can save a significant amount in transaction costs. Moreover, optimizing performance is a crucial indicator of the developer's skills. Inefficient steps provide more room for failure, and developers should avoid them. When gas costs are high, smart contracts may not execute, particularly if a low gas limit is utilized.
Smart Contract Vulnerabilities
Security vulnerabilities are the primary focus of smart contract audits. However, many issues may require advanced techniques and strategies to drain funds. For instance, market manipulation may exploit weak smart contracts to carry out flash loan attacks. To identify these issues, auditors start with a break-testing process and simulate malicious attacks on the smart contract. Common vulnerabilities include reentrancy issues, integer overflows and underflows, and front-running opportunities.
Platform Security Flaws
Most audits involve examining the network that hosts the contracts and even the API used to interact with the DApp. A project may be vulnerable to a DDoS attack or may have its website UI compromised, which could result in users linking their wallets to malicious blockchain applications.
Audit Report
The audit process culminates in the publication of the audit report. To promote transparency, the audit findings should be shared with the public. The report typically organizes the results by severity, including critical, significant, and minor categories. Moreover, the report should also indicate the status of the identified issues, allowing projects to address any problems before the report is finally released.
A standard report will include the following:
- An executive summary.
- Recommendations.
- Demonstrations of extra code.
- A complex breakdown of coding flaws.
The project has a designated period to act on the report's discoveries before the official version is shared.
Where Can I Find a Service to Audit My Smart Contract?
Several well-known smart contract audit services are now available. Two of the most popular offer quotes require the submission of information before initiating an audit.
CertiK
CertiK ensures users' safety through its rigorous security measures. Top exchanges, including Binance, OKEx, and Huobi, trust CertiK as their recommended blockchain and smart contract auditor. The company conducts comprehensive audits of all Web3 platform components, including projects on Ethereum, BNB Chain, Polygon, and over a dozen Layer 1 blockchains.
ConsenSys Diligence
Founded by Joseph Lubin, a co-founder of Ethereum, ConsenSys is a major player in the cryptocurrency and blockchain development industries. Through ConsenSys Diligence, the enterprise offers Ethereum smart contract audits and an automated service that assesses Ethereum Virtual Machine (EVM) contracts for frequent errors.
What Is the Price of Conducting a Smart Contract Audit?
The cost of performing an audit can vary greatly depending on the number of smart contracts that need to be audited. Most audits cost thousands of dollars, and larger projects may easily exceed $10,000. Additionally, the reputation and expertise of your chosen audit company will impact the amount you pay.
Conclusion
Smart contract audits have become an important element in the evaluation process for investors and users. Nevertheless, with an overwhelming amount of projects on the market already utilizing an audit, it no longer serves as an absolute reference point. Hence, reading an assessment with a critical eye is of utmost importance. While a deep understanding of the technical details may be outside the capacity of most, even a brief examination of the comments related to potential issues and the significance of each one could generate helpful insight.