Smart Contract Audit – What Is It and Why It’s Important
Blockchain technology is invulnerable, but not every application is perfect. Some apps may produce imperfect smart contracts. When it comes to smart contracts, the rules are written in computer code, which leaves zero tolerance for error. The code is final after it has been made public.
This emphasizes the importance of having a system that can promptly identify security vulnerabilities and other problems with smart contracts. As part of an audit for vulnerabilities and inefficiencies, blockchain security specialists examine the code of a crypto or blockchain project line by line.
What Is a Smart Contract Audit?
The process of auditing entails a systematic review and thorough analysis of the smart contract code to detect any erroneous coding or security vulnerabilities that may exist. This guarantees the dependability of the blockchain applications and offers solutions to troubleshoot issues. Typically, smart contract security audits entail utilizing analysis tools and conducting manual code analysis.
Why Is It Important?
Currently, security is a critical issue when it comes to deploying a new product. Failure to address inefficiency, security, and misbehavior concerns when developing smart contracts on a blockchain network may lead to significant additional expenses.
Businesses are worried about deployment because of their irreversible nature. Additionally, due to smart contract vulnerabilities, the complete contract and its associated assets can be lost. Thus, the need for smart contract auditing has emerged as a necessity in recent times due to the following rationales:
- Conducting code audits early in the development process is advisable to prevent critical issues from arising post-launch, which can be expensive to fix.
- An experienced security smart contract auditor should manually double-check the code to eliminate false results.
- To prevent security attacks, it is important to be vigilant for any security vulnerabilities while writing and modifying code.
- Implementing a smart contract security audit provides decentralized product owners with the assurance that their code is secure. This results in enhanced security measures.
- The smart contract auditing process facilitates a continuous security assessment, enabling developers to conduct ongoing security assessments and improve their development environment.
- The vulnerability report generates an executive summary, vulnerability details, and mitigation advice for analytical purposes.
Types of Audits
Audits may be classified in a variety of ways, depending on the specifics of individual endeavors. In what follows, we’ll delve into the processes of both human and machine auditing.
Automated auditing
Implementing automated smart contract auditing results in a significant reduction in response time by eliminating the need for human auditors. The audit program detects program parameters for identifying common coding errors. The efficacy of this audit is directly proportional to the effectiveness of the automated analysis tool employed.
Manual auditing
This audit is executed as a distinct undertaking via the guidance of proficient smart contract developers. During the audit, the developers will review the code, thoroughly evaluate the application’s requirements, and verify that the project executes the expected operations.
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Methods for Auditing
Gas efficiency
The primary emphasis of smart contract audits is not limited to ensuring the security of the blockchain. Developers also consider efficiency and optimization. Certain contracts may involve a complex sequence of transactions to fulfill their intended purpose. Optimizing contracts can significantly reduce transaction costs, which is particularly important given the high gas fees associated with networks such as Ethereum.
Optimizing performance is a key measure of a developer’s proficiency. Avoid inefficient steps as they increase the likelihood of failure. Insufficient gas limit usage can lead to the failure of smart contract execution, particularly during periods of high gas costs.
Contract vulnerabilities
Most tasks involved in audits entail scrutinizing contracts for potential security weaknesses. Although certain problems may be apparent, numerous exploits require sophisticated techniques and strategies to deplete funds. Weak smart contracts can be exploited for flash loan attacks through market manipulation. To identify such issues, developers initiate the process of break testing and simulate malicious attacks on the smart contract. Some of the typical vulnerabilities that developers need to be aware of are:
- Reentrancy issues
This occurs when a smart contract initiates an external call to another external contract prior to resolving any effects. The external contract can recursively invoke the primary smart contract and perform interactions that are not authorized since the balance of the primary contract has not been updated yet.
- Overflows and underflows of integers
If an arithmetic operation performed by a smart contract results in an output that exceeds the storage capacity, an error will occur (usually 18 decimal places). This may result in inaccurate calculations.
- Front-running opportunities
Poorly organized code may indicate potential market buys or sells. This can enable third-party users to utilize the data and leverage it for their personal gain.
Advantages
Performing an audit on the smart contract for your project is crucial for enhancing its security, usability, and reliability.
Fixing potentially costly vulnerabilities
Untimely identification of coding flaws can lead to substantial losses. A vulnerability in the signature verification protocol of an escrow system called Wormhole allowed hackers to steal 120,000 wETH, equivalent to $326 million. Thus, a smart contract audit may be considered an investment rather than an expense.
Getting helpful advice from established professionals
After the completion of the audit, the code is meticulously reviewed by the audit providers. The audit team furnishes the project team with suggestions and recommendations to effect the required modifications based on the identified concerns.
Giving your community extra peace of mind
Performing a security audit on your project by professionals in the field and making necessary adjustments can provide your user base with added assurance. The users exhibit enhanced trust in the applications and utilize them more confidently.
When Is It Necessary to Conduct an Audit?
Due to the irreversible nature of smart contract deployment, developers must address businesses’ concerns regarding the viability of their projects. The complete contract and its related assets may be lost due to security vulnerabilities. The following projects require a smart contract audit:
Token contracts/crowdsales
Implement a crowdsale to distribute tokens utilizing a professional token smart contract audit that supports various programming languages and protocols such as C++, Solidity, and JavaScript.
DeFi projects
In 2022, DeFi was responsible for over 90% of all cryptocurrency hacks. When working with intricate systems like those that utilize smart contracts, it is advisable to employ DeFi audits to ensure their security.
dApps
Performing a security audit for a dApp is essential to ensure its secure deployment on a blockchain platform. The backend of a dApp is coded using a smart contract, similar to other web applications. It is crucial to conduct a comprehensive security audit to identify and eliminate any potential vulnerabilities.
NFTs and marketplace
Autonomous platforms facilitate the trading of digital assets, enabling users to engage in NFT transactions. The possession of private keys to all assets within a platform highlights the significance of maintaining uncompromised security.
Key Vulnerabilities
There is always a possibility of errors or oversights during the development of the security architecture. The following are potential security vulnerabilities that smart contracts may contain:
Timestamp dependency
The contract’s logic relies on the present time. This implies that the developer can alter the output of the execution by modifying the device’s current time.
Function visibility errors
Solidity is a programming language that developers use to implement smart contracts. The language’s default visibility modifier is set to public. If visibility is not defined for a private function, there is a risk of contract destruction if anyone calls the Destruct function.
Reentrancy attacks
A reentrancy attack is a vulnerability that arises when a function initiates an external call to another contract that cannot be trusted. This issue may arise as a result of the developer’s lack of concern and disregard for the task at hand. Due to the attack, the unreliable contract may perform a recursive invocation to the initial function to deplete the funds.
Random number vulnerability
Attackers could potentially use random number generation (RNG) to accurately predict the random number generated by the contract.
Failure in differentiating humans and contracts
Not properly distinguishing between a human or a contract invoking the smart contract could lead to unpredictable consequences. By accurately predicting the timestamp of a contract, a developer can earn money through the airdrop function in the popular Fomo3D game. This can be achieved by correctly guessing the block.
Spelling mistakes
Constructors are frequently utilized in initializing contracts and identifying their owners. The function Object() { [native code] } function in Solidity calls upon contract deployment to initialize the state variables. During the development process, a misspelled function can go unnoticed by the compiler. This can result in the function being accessible to the public in constructors.
How to Perform an Audit
Performing an audit entails a thorough assessment of the blockchain application’s smart contracts. The fundamental approach to conducting an audit is generally consistent across various audit service providers. The smart contract audit process involves the following steps:
Requirement gathering
The previously mentioned variables aid in defining the audit scope, intended business behavior, overall architecture, and project objectives. Developers must ensure that auditors are granted access to essential documents such as the business requirement document, technical specification document, project’s whitepaper/yellow paper, smart contract code through GitHub commits, and other relevant materials.
Unit testing
During the auditing process, the developer executes unit tests to verify that the smart contract operates according to its intended functionality. At this stage, developers utilize auditing tools and testnet environments to ensure that unit testing comprehensively covers the highest potential risks.
Manual auditing
This is the auditing process’s most crucial aspect. The code is scanned by the auditor for vulnerabilities on a line-by-line basis. Subsequently, the developer proceeds with the deployment of auditing tools such as Mythril, Slither, MythX, Scribble, and other similar tools to conduct a comprehensive examination of the code.
Developers receive recommendations from auditors regarding modifications to smart contracts for addressing vulnerabilities and optimizing code.
Initial reporting
After conducting both manual and automated audits, a preliminary report is generated that outlines identified issues and their corresponding levels of severity. In addition, the security team furnishes clarifications regarding the smart contract’s issues and their corresponding levels of severity.
Code refactoring
At this stage, developers work closely with auditors to address issues identified in the initial report by modifying the code accordingly. It is ideal for developers to address every bug, regardless of its severity level. However, it is recommended to prioritize the resolution of high and medium-severity issues first.
Final report
Refactor the postcode and have auditors perform another scan on the smart contract to verify optimal code functionality.
How Long Does a Contract Audit Take?
The duration required to conduct a security audit of a smart contract is contingent upon the scope and intricacy of the code. Typically, a development team can generate a detailed report in a matter of days. However, larger applications may require more time to be audited. For the successful implementation of your blockchain application, it is imperative to allocate sufficient time for a comprehensive security audit.
How Much Does It Cost?
The smart contract audit firms determine the cost. Typically, the overall price ranges from $5,000 to $15,000. In certain edge cases, the cost could exceed the standard amount. Upon completion of the audit, the auditing firm will furnish an audit report that outlines the code’s defects and suggests enhancements to strengthen the application’s overall security.
FAQ
What is an automated audit?
Advanced software is utilized in an automated smart contract audit to identify vulnerabilities. While this methodology does decrease the audit duration, it’s important to note that the software will inevitably have constraints. The occurrence of false positives should always be taken into consideration. In addition, automated software may not be able to detect intricate security vulnerabilities.
When is the best time to look for an external smart contract auditing service?
It is advisable to conduct an Interim Audit during the development of an application that involves intricate components that have already been programmed. This will enable an experienced developer to scrutinize the code for any potential security loopholes and to ascertain that the project is progressing as planned.
How long does the auditing process take?
The duration of the audit procedure is influenced by multiple variables, such as the intricacy of the business specifications, code quality, dependencies, and incorporation with current protocols.
What are the standards for smart security audits?
At present, there are no established norms or official bodies responsible for validating and accrediting the precision of smart contracts with regard to the code reflecting the signed contract.
Are evaluations commanded without regulations a genuine opportunity to pursue?
Performing regular and thorough settlement reviews is crucial to prevent significant financial losses and protect the reputation of your partnership. A smart contract’s state can be accurately assessed by a business entity like EvaCodes, providing developers with confidence and awareness.
What is an audit report?
Upon completion of the entire auditing process, the auditors furnish a report. It facilitates the establishment of transparency within the process. The vulnerabilities are classified into critical, major, and minor. The audit report contains a status list of the issues. The resolution of issues in projects is dependent upon them and must be completed prior to the release of the final report.
Why rely on audits?
Audits have emerged as the industry norm, providing investors and users with a reliable means of ensuring security. When each project possesses a badge, it loses its significance as a straightforward indication of excellence. It is crucial for developers to review the audit personally. It is advantageous for developers to examine the comments and potential error severity, even if they have limited technical knowledge.
What is the time scale to complete an audit?
Performing security testing on smart contracts is a laborious process that encompasses multiple stages. The duration of conducting a security audit depends on the type and intricacy of the project. Typically, the process requires a duration of 7–10 days. If the project is lengthy and intricate, it may require up to a month to conduct an audit.
What is the difference between manual and automated smart contract audits?
Auditors conduct two types of audits to assess vulnerabilities in smart contracts, namely:
Manual auditing refers to the process of reviewing and analyzing data or information manually, without the use of automated tools or software. This can involve examining financial records, conducting physical inspections, or reviewing documents to ensure compliance with regulations or standards.
Automated auditing refers to the process of using software tools and scripts to automatically evaluate and analyze various aspects of a system or application. This can include checking for security vulnerabilities, compliance with industry standards and regulations, performance metrics, and other relevant factors.
Can I conduct a smart contract audit myself?
Performing an audit on a smart contract is essential. Smart contracts must be free of any security flaws as they are susceptible to exploits. Thus, it is advisable to depend on a skilled security auditor with the technical expertise and experience to perform the task on your behalf.
What benefits does a company get upon passing a smart contract audit?
Performing a smart contract audit allows developers to detect and address any vulnerabilities in a smart contract that could potentially be exploited by malicious actors, resulting in significant harm to the organization and its users. The passing of the audit will serve as evidence of the organization’s reliability to potential investors and partners.
Will I get recommendations on addressing detected issues after an audit?
Experienced developers generate a comprehensive primary audit report for clients initially. The code includes all vulnerabilities. In conjunction with their findings, they also provide suggestions for resolving the identified problems. Ultimately, the developers furnish the conclusive audit report to determine whether the susceptibilities have been appropriately resolved.
Do security engineers pay attention only to security vulnerabilities?
In addition to addressing security vulnerabilities, security engineers are responsible for developing and testing new security functionalities, managing security incidents, strategizing and executing computer and network upgrades, and resolving technical issues.
Why should I trust EvaCodes?
EvaCodes employs a team of proficient smart contract auditors who possess extensive knowledge and expertise in the field. Our team of developers is well equipped to handle unexpected security issues as we have conducted thorough audits on over 175 smart contracts and collaborated with 145 clients who had diverse security needs.
Conclusion
Smart contract audits are now a routine procedure for investors and users. If a feature is ubiquitous across all projects, it no longer holds value as a distinguishing factor. It is crucial for developers to read the audit themselves. Providing comments and indicating the level of severity for potential issues can be advantageous, even for those without technical expertise.
Written by Vitaliy Basiuk
CEO & Founder at EvaCodes | Blockchain Enthusiast | Providing software development solutions in the blockchain industry
