What is Smart Contract Auditing in Crypto?

In this post, you will learn What is Smart Contract Auditing in Crypto? How to conduct smart contract audits?

Blockchain technology has undoubtedly revolutionized many industries. However, hacks and exploits of many big-name blockchain applications have created notable setbacks for the long-term growth of blockchain. Well, blockchain basically focused on offering optimal levels of security, right? The Ethereum blockchain network contains a lot of computer power to maintain security, as you can see when you look at it. However, blockchain networks can be secure, while the applications running on them may not be as secure as expected.

Blockchain applications use smart contract audit services to interact with the blockchain, and smart contracts have deep security vulnerabilities. You’ll need a smart contract audit in this situation. You might be unsure of what it means to audit a smart contract or what tools you’ll need. The following discussion provides you with a detailed guide on auditing smart contracts with a summary of their definition, types, and processes.

What are smart contracts?

Before we find out how to audit a smart contract, let’s have a brief understanding of smart contracts. Smart contracts are computerized transaction protocols designed to execute the terms of a contract. Primarily, smart contracts are designed to address common contractual terms while reducing accidental exceptions and middleman involvement.

Today, smart contracts serve a wide range of use cases, such as supply chain management, ICOs, and electoral voting. So where is the problem? Just like any other software, smart contracts come with security vulnerabilities. Smart contracts have security flaws just like any other piece of software.ary to ensure that smart contracts are free from security issues. At the same time, the audit also ensures that smart contracts are optimized to ensure ideal levels of performance.

Definition of a smart contract audit

The most important aspect to understand the smart contract audit process is its definition. The audit process of a smart contract focuses on the scrutiny of the code used to enter into the terms and conditions of the smart contract. Before implementing smart contracts, developers of smart contracts might quickly find weaknesses and defects with the use of such an audit.

Smart contract audits are often carried out by third parties to guarantee a complete examination of the code. On the other hand, companies can choose professional smart contract auditors to carry out the auditing process.

It is crucial to properly test the code before putting the smart contract into use. Why? It is difficult to update the code after the smart contract has been written to the blockchain. Implementing smart contracts without proper audits could lead to adverse circumstances, such as discrepancies in the intended execution of the contract. At the same time, improper auditing processes could also expose you to risks like personal data loss or data theft.

Read More: Smart contract audit on the Blockchain and How It Works | simply explained

Importance of smart contract audits

It makes sense to look for the definition of a smart contract audit after learning the definition. One of the major issues with using smart contracts today is security. Implementing smart contracts on a blockchain network may incur astronomically large extra costs due to worries about inefficiencies, security risks, and improper conduct.

Companies are concerned about the implementation of smart contracts, considering their irreversible nature. Furthermore, you also risk losing the entire contract and associated assets due to security vulnerabilities in smart contracts. Therefore, smart contract auditing becomes an important requirement in current times for the following reasons.

• Better code optimization.
• Improved performance of smart contracts
• Increased wallet security
• Security against hacker attacks

So you can clearly notice that smart contract audits can be very useful for,

• Decentralized Application Product Owners
• Individuals who need to earn the trust of investors, stakeholders, taxpayers and more
• ICO startup creators and organizers
• Smart contract developers

With so many security-critical advantages of smart contracts, it’s important to figure out how to audit a smart contract right away. Smart contract auditing skills could help businesses stay safe from notable security attacks like,

• re-entry attack
• reordering attack
• short direction attack
• Over and underflows
• replay attack

Basics of smart contract auditing

While you may have started to wonder about the cost of smart contract auditing, it’s important to understand the basics first. So what will be the basic structure for smart contract audits? One of the first areas of focus in the structure of your smart contract audits should be on common issues such as re-entry errors, compile errors, and stack issues. Another notable area to focus on in smart contract audits concerns identified bugs and security issues in the smart contract host platform. Furthermore, smart contract auditors should also focus on testing the smart contract by simulating different attacks on the contract.

Now that you know the basics required in smart contract audits, you should know the types of audit processes. Smart contract auditing is broadly categorized into manual code review and automated code analysis. Manual code review for smart contracts focuses on the team evaluating each line of code to identify potential compilation, security, and re-entry issues.

More importantly, manual code review would put more emphasis on identifying security vulnerabilities. On the other hand, time savings are a significant benefit of using automated code analysis for smart contract audits. In addition, automatic smart contract code testing also enables enhanced and comprehensive penetration testing for faster identification of vulnerabilities.

Smart contract audits work

While you can discover various possible approaches to smart contract auditing through different tools, it is important to know how auditing works. An extensive analysis of the blockchain apps’ smart contracts is part of the process of bsc smart contract audit. The audit focuses on fixing design flaws, security holes, and coding mistakes. Professional smart contract auditors will usually provide you with a detailed audit roadmap to help you better understand the process. The optimum process for smart contract audits include the following best practises.

Agreement on specifications

The most important factor in the smart contract audit process focuses on reaching agreement regarding the smart contract specification. The smart contract specification and other related documentation provide a clear explanation of a project’s architecture, construction process, and design options. You can usually find the specification documented in the project’s README file.

It’s important to note that technical documents and docstrings can be reliable tools for explaining specific sections of code. However, they do not serve as a replacement for a well-documented specification. The lack of a specification would leave the auditors without any idea about the desired and actual behavior of the code. Therefore, the first phase of how to audit a smart contract begins with a complete specification of the project.

At this stage, the auditors would also look for the ‘code freeze’ moment, which would imply the completion of the code. During the ‘code freeze’ step, the smart contract code must be in the final draft stage. The developers must have made every effort to identify any anomalies or undesirable factors in the code.

The specification for the project would also include the final commit hash to ensure that the auditors and developers have a consensus regarding the code being audited. Developers must provide assurance that any changes beyond the ‘code freeze’ point will not be subject to audit.