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Hidden risks in Smart Contracts: How to ensure a secure implementation

Smart contract audit services

By cyphershieldtechPublished about a year ago 5 min read

Smart contracts are a powerful tool in the world of cryptocurrencies and blockchain technology. They are autonomous, irrevocable, and run automatically when certain conditions are met, making them an ideal solution for a wide variety of applications, from automating business processes to creating new forms of crowdfunding. However, as the popularity of smart contracts increases, so do the risks associated with their implementation. From typos to security flaws, the hidden risks in smart contracts can be devastating. It is essential that developers understand and address these risks to ensure the security of their deployments and protect users from potential attacks or bugs.

What is a Smart Contract?

A Smart Contract is a type of code that allows the verification and automatic execution of an agreement . This concept represents a significant change in the business world, since Smart Contracts work on blockchain technology and do not require human intervention to verify and enforce the agreed conditions.

In the case of loan contracts, for example, Smart Contracts allow the lender to automatically close access to money if the borrower does not comply with the agreed payments or interest. In addition, Smart Contracts are also useful in data verification and for the implementation of clauses in insurance contracts, thus reducing the chances of disputes.

It is true, the creation of an efficient Smart Contract is a major challenge. The ability to express value, transparency and immutability are three of the most important attributes of a Smart Contract, but they also make them more vulnerable to cyberattacks.

Despite the fact that there is not always a malicious intent behind these attacks, errors in the programming of Smart Contracts have led to capital collapses and significant losses for companies. Therefore, it is essential to be aware of the most common vulnerabilities that can arise in Smart Contracts.

But now we are going to get into the matter with the five most common problems in the security of Smart Contracts and how to avoid their possible risks and consequences.

1. The Arithmetic Error of Whole Numbers

Using integers to represent values ​​in smart contracts is common practice due to the lack of support for floating point numbers. Often, reducing the value to a smaller unit is required to achieve adequate precision. Most tokens support up to 18 decimal places, further improving accuracy.

However, developers should be aware of the potential for integer overflow. Just like car mileage, integers in a computer also have a maximum value, and once that value is reached, they return to their minimum value. Similarly, subtracting 4 from 3 in an unsigned integer will result in an overflow and a very large value. To avoid this problem, developers can use safe math libraries.

Also, developers should be aware of the inaccuracy that can occur when integer arithmetic is executed incorrectly. The order of operations is crucial, especially when calculating percentages. For example, to find 25% of 80, it is common to divide by 100 and then multiply by 25. However, wrong division can result in rounding error. For example, calculating 80/100 * 25 using only whole numbers will result in 0.

This error, although it seems simple, is common among developers. Therefore, it is important to pay attention to detail and be aware of possible errors in integer arithmetic in smart contracts.

2. Vulnerabilities in the Block Gas Limit

Ethereum keeps block sizes in check through the block gas limit. This implies that the amount of gas that transactions within a block can consume is limited. If a transaction consumes too much gas, it will not be included in the block and therefore will not execute.

This can lead to a common vulnerability: when data is stored in variable-size arrays and accessed through a loop, the transaction can time out quickly and roll back if there are too many items in the array. This issue usually occurs in production, but not during testing, because the test dataset is typically smaller than the production dataset.

This vulnerability is dangerous because contracts related to it usually pass unit tests and work well with a small number of users. But as the project grows and the data set gets larger, these contracts can fail. In this case, there may be an irrecoverable loss of funds, especially in the case of recurring payments.

3. Front Running

Before continuing, I prefer to make a short introduction for those who are not familiar with the term.

To understand what front running is, it is essential to know how to make profits ahead of the execution of a trade. Traditionally, front running is accomplished by acquiring inside information about events that may affect the price of shares, commodities, or other financial instruments. However, in the cryptocurrency markets, order flow is the key element.

Now yes, we continue with regard to security...

Analysis of the order flow and the size of the blocks can provide an idea of ​​the direction in which the price is moving. Therefore, front running in the cryptocurrency realm involves anticipating the correct order in the order flow.

Unconfirmed transactions are visible in the memory pool before miners add them to a block, allowing interested merchants to monitor their content and advance the transaction by paying higher fees. This process can be easily automated and is common in decentralized finance applications.

Frontrunning refers to taking positions on unconfirmed transactions, and is a result of transparency in the blockchain.

Fixing this issue often requires a major refactoring or redesign.

4. The lack of control in the parameters and preconditional controls

In programming, a common mistake is forgetting to check the parameters of a function or not performing the necessary checks to ensure the validity of a particular operation. This can include address parameters not being checked against address zero, or an unauthenticated user not having enough tokens to perform a specific transaction. The access check is also important, as only certain types of users should be allowed to call a given function, but sometimes this check is skipped.

These errors are often the result of an oversight in the design process. Therefore, it is useful to have a written record of the functions, including the parameters, the preconditions, and the operations to be performed. Following stable design patterns, such as Check-Effect-Interaction, can also help prevent these types of vulnerabilities.

5. Logical bugs (or not so much…)

The most common problem in smart contracts is an error in their own logic. These errors can be caused by small typos or misinterpretations of specifications, which can have a large security impact. Although programming errors specific to smart contracts are important, logic errors are inherent in the programming itself. It is essential to pay attention to the logic and make sure that the specifications are understood before you start writing the code.

In conclusion…

In short, the security of smart contracts is essential to guarantee the integrity and efficiency of decentralized applications. Common bugs include lack of privacy, reentrancy vulnerabilities, front running, and missing parameters or precondition checks. Also, logic errors can be caused by simple typos or spec misunderstandings. To ensure security, it is necessary to follow good programming and design practices, have a solid understanding of blockchain technology and smart contracts, and perform extensive testing and peer review before implementation. The security of smart contracts is a critical aspect in the development of decentralized applications and must be properly addressed.

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