What is a crypto smart contract security audit?

A security audit provides a detailed analysis of a project’s smart contracts to protect invested funds. Since all transactions on the blockchain are finite, it is impossible to return funds in the event of theft. Auditors study the code of smart contracts, compile a report and deliver it to the project team. A final report is then published detailing the remaining bugs and the work done to address performance and security issues.

Smart contract security auditing is widespread in the decentralized finance (DeFi) ecosystem. The decision to invest in a blockchain project may be based in part on the results of smart contract code review.

Although many users understand the importance of auditing, most of them are not ready to delve into the structure of the code. Let’s look at the ways, tools, and results of smart contract security audits that are important for making effective investment decisions.

What is a smart contract audit?

A security audit allows you to examine a project’s smart contract code. Contracts are typically written in the Solidity programming language and are provided through GitHub. Security audits are especially important for DeFi projects with millions of dollars in transactions or a large number of participants. An audit generally includes four steps:

• The audit team performs an initial review of the smart contracts.
• The results of the analysis are provided to the action project.
• The project team makes changes based on the problems found.
• The audit team issues a final report, taking into account new changes and remaining errors.

Many users consider smart contract audit when investing in new DeFi projects. Auditing is standard procedure for large-scale projects. At the same time, reports produced by major auditing firms are seen as more valuable in the eyes of investors.

Why do you need a smart contract audit?

Since smart contracts are used to transfer or lock important funds, they can be subject to hacking attacks. Minor bugs in the code can lead to huge losses. For example, a DAO hack on the Ethereum blockchain led to the theft of $60 million in ETH and a hard fork of the network.

Since blockchain transactions are irreversible, it is very important to ensure that the project code is secure. The peculiarities of blockchain technology make it difficult to return funds and solve problems afterwards, so it is better to identify possible vulnerabilities in the project in advance.

How smart contract auditing works

Smart contract auditing is a fairly common service. And while audit firm approaches may differ slightly, a typical audit looks like this:

Determination of the scope of the audit. The specifications of the smart contract are determined by the purpose of the project and the general architecture. The specification helps the audit team understand the goals of the project when writing and using the code.

Initial price quote based on amount of work.

Test. Verification tools and methods depend on the audit team. Automatic and manual controls are generally used.

Create a draft report with the errors found and deliver it to the project team for correction.

Publication of the final report, taking into account all the actions carried out by the team to solve the problems found.

Ways to audit smart contracts

gas efficiency

Smart contract auditing aims not only to verify the security of the blockchain, but also its efficiency and optimization. Some contracts perform a complex series of transactions to fulfill their function. Because gas fees are high on networks like Ethereum, efficient contracts can significantly reduce transaction fees.

Smart contract performance optimization is a measure of developer skill. Inefficient development steps lead to errors and should be avoided. The operation of smart contracts can be interrupted due to the high cost of gas, especially at a low limit.

Smart contract vulnerabilities

Most auditing involves checking contracts for security vulnerabilities. While some issues are on the surface, bsc smart contract audit many bugs can only be fixed with the help of sophisticated tools and strategies. For example, a weak smart contract combined with market manipulation could be attacked by flash lending. To detect these problems, the auditors try to hack the contract and simulate hacking attacks. Common vulnerabilities include:

Recursive call: A smart contract makes a call to another external contract before the changes have been committed. After that, the external contract can recursively interact with the original smart contract in an invalid way, since its balance has not been updated yet.

Integer overflow: the smart contract performs an arithmetic operation, but the value exceeds the storage capacity (usually 18 decimal places). This can lead to an incorrect calculation of the amounts.

Anticipation: Poorly structured code contains data about future transactions that can be used by third parties to their advantage.

Platform security bugs

Most audits involve examining the network with the smart contracts hosted on it and the APIs used to interact with the DApp. If the project is vulnerable to a DDoS attack or has a compromised interface, users are at risk of connecting their wallets to malicious blockchain applications.

What is an audit report?

The report is provided at the end of the audit. The project team is expected to publish the findings to the community. Most reports classify issues by severity: critical, major, minor, etc. The report also indicates the status of the issue, as the project team has time to resolve the issue before the final report is published.

In addition to general conclusions, the report typically contains recommendations, redundant code examples, and a full analysis of coding errors. The project team has time to correct errors before the final report is published.

conclusion

Fortunately for investors and users, smart contract auditing has become the gold standard. On the other hand, when most projects are verified by audit, it becomes increasingly difficult to judge their value, so it is very important that you read the audit company’s report yourself. Even if you are not technically savvy, you will be able to read the feedback and the severity of potential issues.

Now when you come across an audit report, it’s easier for you to understand its content. Remember to look at the big picture and get as much information about the project as possible before making investment decisions.