Smart contracts are self-executing agreements with the capability to trace the movement of physical and intellectual property and facilitate financial transactions. Due to their autonomous nature and the authority to allocate high-value resources between complex systems, ensuring security and consistency is crucial. In this guide, we will delve into the importance of smart contract security audits, their key vulnerabilities, and the process of conducting an audit.
Understanding Smart Contract Security Audits
A smart contract security audit is a comprehensive examination of the code that underpins the smart contract’s terms and conditions. The primary objective of a smart contract audit is to identify vulnerabilities and flaws before deploying smart contracts, ensuring the security of funds and assets.
The importance of smart contract security audits cannot be overstated, as smart contracts are immutable and irreversible once deployed on a blockchain. Therefore, ensuring the security and integrity of smart contracts is paramount to prevent costly errors, security attacks, and the loss of assets.
Key Vulnerabilities in Smart Contracts
Smart contracts are susceptible to various security vulnerabilities, including:
- Timestamp dependency: Smart contracts that rely on the current time for execution are vulnerable to manipulation by miners, who can influence the execution result to meet predetermined goals.
- Function visibility errors: Functions with public visibility can be accessed by anyone, potentially leading to unauthorized actions. For instance, a destruct function can be called to destroy the contract immediately.
- Reentrancy attacks: Reentrancy attacks occur when a function makes an external call to another untrusted contract, allowing the untrusted contract to make a recursive call back to the original function, potentially draining funds.
- Random number vulnerability: Smart contracts that use a publicly known variable as a seed for generating random numbers are vulnerable to attacks, as an attacker can accurately guess the random number generated by the contract.
- Failure to differentiate between humans and contracts: Smart contracts that fail to identify whether the caller is a human or another contract can have unforeseeable consequences, such as unauthorized access or actions.
- Spelling mistakes: Misspelling a function name, such as constructors used for contract initialization, can result in the function being public, allowing anyone to call it and change the contract’s owner.
The Process of a Smart Contract Audit
A smart contract audit follows a standard procedure, which may differ among auditors. The following is a typical procedure:
- Collecting code design models: Auditors gather the code specifications and examine the architecture to ensure the guaranteed integration of third-party smart contracts. This helps auditors understand the goals of the project and determine its scope.
- Running unit tests: Auditors test cases to put each smart contract function to the test. Audit specialists use tools (both manual and automated) to guarantee that unit test cases include the smart contract’s overall code.
- Selecting an auditing approach: Auditors often inspect smart contracts without software help, as manual auditing is more efficient than an automated audit. With this approach, attacks like front-running can be efficiently detected.
- Drafting the initial report: After auditing is completed, auditors draft the code flaws discovered and provide feedback to the project team to fix those errors. Some smart contract service providers have a team of experts that help fix each bug found.
- Publishing the final audit report: After the bugs are fixed, auditors publish the final report, taking into account any actions made by the project team or external experts to resolve the issues that were raised.
Smart Contract Audit Cost and Timeline
Smart contract auditing providers charge between $5,000 and $15,000 on average, depending on the complexity of the code. The auditing process can take anywhere from two to 14 days, depending on the project, the size of the smart contract, and the urgency. For large projects or protocols, the smart contract audit process can take up to a month.
How to Perform a Smart Contract Audit
Smart contract auditing can be performed using manual or automated approaches.
Manual auditing entails a team of experts/auditors looking over each line of code for compilation and re-entry problems. This can also aid in detecting other security vulnerabilities that are often overlooked, like poor encryption practices.
Automated auditing, on the other hand, uses bug detection software, which helps smart contract auditors locate the exact location responsible for errors. The projects that require faster time-to-market often prefer an automated approach because it helps find vulnerabilities much faster. However, automated software may not always understand the context and can miss vulnerabilities while checking code.
How to Become a Smart Contract Auditor
Smart contract auditing mandates programming knowledge since it involves checking code line by line. If you have no prior programming skills, be aware that it will take years for your code critiques to be meaningful.
To become a smart contract auditor, one must understand the basics of Ethereum blockchain and Solidity (the programming language used to write Ethereum smart contracts). Reading the Ethereum documentation and taking courses on fundamental blockchain technology are good places to start. Another optimal way to learn any blockchain or programming language is by using it in practice.
It is important to note that blockchains use different programming languages. To familiarize yourself, please read our guide: A beginner’s guide to the popular blockchains used in NFT development.
Having a financial background is an additional benefit when you are auditing decentralized finance (DeFi) projects. Most of the DeFi projects use standard finance terms; therefore, the auditor must understand basic financial terms like crypto derivatives to audit a smart contract effectively.
Conclusion
Smart contract security audits are a critical aspect of blockchain development, ensuring the integrity and security of smart contracts. By understanding the importance, process, and key vulnerabilities of smart contract audits, developers and businesses can mitigate risks, prevent security attacks, and build trust in their decentralized applications.
As the use of smart contracts continues to grow, the demand for smart contract auditors will also increase. Therefore, acquiring the necessary skills and knowledge to become a smart contract auditor can be a lucrative career path for those interested in blockchain technology.
In summary, smart contract security audits are essential for ensuring the security and integrity of smart contracts, preventing costly errors, security attacks, and the loss of assets. By understanding the process, key vulnerabilities, and best practices for conducting a smart contract audit, developers and businesses can build trust in their decentralized applications and contribute to the growth and adoption of blockchain technology.