Smart Contract Audits Explained

Smart Contract Audit

Smart contracts are adaptive tools that can track the movement of physical objects and intellectual property while also facilitating and verifying financial transactions. Because smart contracts can allocate high-value resources between complex systems and are mostly autonomous, security and consistency are crucial.

Understanding the likelihood and criticality of potential contract faults or detected errors is thus critical for smart contract security. A smart contract security audit thoroughly investigates a project’s smart contracts and is required to protect the funds invested through them.

As a result, the smart contract audit approach focuses on reviewing the code that underpins the terms and conditions of the smart contract so that developers may quickly uncover vulnerabilities and defects before implementing smart contracts using such an audit.

Why is a smart contract security audit necessary?

Security is currently one of the most important issues for smart contract deployment. Concerns about inefficiency, security, and misbehavior emerge because ignoring them when creating smart contracts on a blockchain network could result in exceptionally large additional costs.

Furthermore, tiny coding mistakes might result in enormous sums of money being stolen. The DAO breach on the Ethereum blockchain, for example, resulted in the seizure of around $60 million in Ether (ETH) and a hard fork of the Ethereum network.

As a result of the irreversible nature of smart contracts, businesses are apprehensive about their deployment. Furthermore, due to smart contract security issues, you risk losing the entire contract and its associated assets. As a result, smart contract auditing has become an absolute necessity in recent years for the following reasons:

  • Eliminate costly mistakes: By auditing your code early in the development lifecycle, you can avoid potentially deadly issues after launch.
  • Veteran security auditors manually double-check your code to eliminate erroneous results.
  • Prevent security breaches: As you write and modify code, keep an eye out for any security issues to help prevent security breaches.
  • Enhanced security: A smart contract security audit ensures that the code in decentralized products is secure.
  • Continuous security auditing: The smart contract auditing procedure enables you to do continual security audits, hence improving your development environment.
  • Analytical reports: A vulnerability report includes an executive overview, vulnerability specifics, and mitigation advice.
  • Prevent security breaches: As you write and modify code, keep an eye out for any security issues to help prevent security breaches.
  • Enhanced security: A smart contract security audit ensures that the code in decentralized products is secure.
  • Continuous security auditing: The smart contract auditing procedure enables you to do continual security audits, hence improving your development environment.
  • Analytical reports: A vulnerability report includes an executive overview, vulnerability specifics, and mitigation advice.

How do you do a smart contract audit?

Smart Contract Audit

A smart contract audit service looks for known vulnerabilities that are specific to each smart contract’s business logic. It also ensures that the smart contract complies with the Solidity Code Style Guide and is free of logical and access control issues. Smart contract security audit standards differ from project to project. Smart contracts can be audited manually or automatically, as detailed further below.

Manual Inspection

A group of experts/auditors examines each line of code for compilation and re-entry issues during manual auditing. This can also help discover other security flaws that are frequently neglected, such as improper encryption methods.

Automated auditing software

On the contrary, the automated smart contract auditing approach employs bug detection software, which assists smart contract auditors in pinpointing the exact location of mistakes. Projects that require a shorter time-to-market frequently choose an automated method since it allows them to uncover vulnerabilities much more quickly. However, automated software may not always understand the context and, as a result, may miss vulnerabilities while inspecting code.

The smart contract auditing procedure

A smart contract audit follows a pretty typical method that can vary greatly between smart contract auditors. A typical process is as follows:

Models of code design are being collected.

Auditors collect code specifications and assess architecture to assure the guaranteed integration of third-party smart contracts. This assists auditors in understanding the project’s goals and determining its scope.

Execute unit tests

Then auditors run test cases on each smart contract function. Auditors employ tools (both human and automated) to ensure that unit test cases contain the overall code of the smart contract.

Choose an auditing strategy

Because manual auditing is more efficient than automated auditing, auditors frequently review smart contracts without the use of the software. Front-running attacks can be identified effectively using this method.

Create the first draught of the report

Following the completion of the audit, auditors draught the detected code issues and provide feedback to the project team on how to correct such problems. Some smart contract service providers include a staff of experts who assist in the resolution of any bugs discovered.

Publication of the final audit report

Following the resolution of the bugs, auditors publish the final report, taking into account any measures taken by the project team or external experts to tackle the concerns reported.

  • Dependence on time

Unlike traditional programs, the execution environment of a smart contract is on the miner’s side. When the logic of a contract is based on the current time, the miner can manipulate the current time to influence the execution result and fulfill a specified purpose.

  • Errors in function visibility

In Solidity, the default visibility property of a function is public. As a result, if a developer forgets to designate the visibility of a private function, anyone can access it. Anyone, for example, can use the Destruct function to abruptly destroy the contract.

  • Reentry assaults

The reentrancy attack is one of the most damaging assaults in the Solidity smart contract. The indifferent attitude of a developer may result in reentry complications. A reentrancy attack occurs when a function makes an external call to another untrusted contract. The untrustworthy agreement then makes a recursive call back to the original function in an attempt to drain cash.

  • Vulnerability due to random number generation

An attacker can precisely predict the random number generated by a contract that uses a publicly known variable as a seed.

  • Failure to distinguish between humans and contracts

Failure to determine if the smart contract caller is a person or a contract could have unanticipated consequences. A hacker, for example, can win money by properly guessing the block in the popular Fomo3d game (i.e., by successfully anticipating a contract’s timestamp).

  • Mistakes in spelling

Constructors are frequently used for contract initialization and determining who owns the contract. The compiler would not catch the misspelling of the function during programming, resulting in the function being public and accessible to anybody.

A function in Solidity is used to set the state variables of a contract. The function is called when a contract is created, and it can be used to establish initial values. There are two kinds of builders: public and private. Furthermore, the Solidity code is compiled with a Solidity compiler, which generates byte code and other artifacts needed for smart contract deployment.

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Author's Bio

Naveen C

Co- founder at Ecosleek Tech Research and Branding at MythX. Talks about #gaming, #metaverse, #blockchain, and #softwaredevelopment

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