What are smart contracts?
Smart contracts are programs run over a blockchain that facilitates issues of agreement.
These agreements are generally bought and sold of cryptocurrencies or other financial services of blockchain technology such as NFT, DeFi etc.
The execution of these contracts happens by technology and no intermediary is involved reduces the time frame and increases transparency in the process.
Smart contract executes by themselves depending upon the terms of the agreement between buying and selling parties, this execution takes place via code lines.
Smart contracts are just like Ethereum accounts denoted by code names and facilitate transactions.
How are smart contracts used?
Smart contracts are created when one is performing transactions over blockchain technology.
One such example can be buying a crypto token. The transaction would require command from both ends, that is the buyer as well as the seller.
Once the terms are met by both, the transaction will take place and get recorded as a smart contract.
This record is visible to only the two working parties and happens in quick fractions of seconds.
Smart contracts are used because of their time efficiency, transparency and proof of transaction.
Security is one such benefit of smart contracts as these are encrypted and therefore very hard to track or breach.
Certainly, the purpose of security has been getting eroded with some parts of frauds and security breaches in recent times.
These incidents bring us to the audit of security to ensure a proper safe working and rectifying safety loopholes in codes and analysis.
Introduction to smart contract audit
Once you have neutered into a smart contract it is irreversible and therefore it is important to test the mistakes and rectify them. Smart Contract Security audit comes with different cases and tests over the blockchain.
These cases are reentrance mistakes, compilation errors, stack problems and many more.
Such cases can be solved by auditing and analysing the faults in codes.
The auditing process involves four major parts that are:-
- Building team and giving access to auditing
- Analysing and reporting errors
- Correction of reported errors
- Final Testing and rectifying any remaining errors left out earlier
Working on smart contract audits
Step 1 – The first step is to present a full record of the building blocks of the code and contract. Explanation of lines and exact working mechanism. Once the auditor is aware of the code specifications that analysis and checking are started.
Step 2 – This step is concerned with testing the smart contract for any bugs and issues. These tests are performed using various technologies and code languages. The testing process can be done on small units or larger ones depending upon the coverage needs of audits.
Step 3 – This step involves auditing via automated technology. Here the tested code is run through automated tools and thereby identifying bugs to be rectified.
Step 4 – Manual analysis is one of the major steps where a human auditor uses his knowledge and efficient skills to understand complex codes and problems with some technical support.
Step 5 – The last step involves preparing a full report of all the issues and bugs with prominent ways to correct them. This report is the final audit report that is fully accountable for the errors and breaches.
Smart Contract Security Audit methods
There are mainly three auditing methods for smart contract auditing:-
- Gas efficiency – This signifies optimizing the transaction cost over blockchain technology. The transaction cost is called gas fees and is usually too high.
The auditor can find the ways by which the codes of the smart contracts can be optimized and gas fees can be minimized.
When the gas fess is at its lower or higher extreme points, most of the time contracts fail to execute and therefore the priority of smart contracts efficiency has to be optimized and audited.
2. Contract vulnerabilities – These vulnerabilities are concerned with security and hacking attacks that manipulate the smart contract. Such cases can be three of them:-
- Reentrancy issues: smart contract makes an external call to another external contract but before any effects are resolved. The external contract interacts with the original in the wrong ways and even when the actual balance has not been updated.
- Integer flows: smart contracts when carrying out arithmetic operations can sometimes go beyond the storage capacity or can also fall short of the minimum. This can create errors in amount estimation and incorrect projections.
- Front running opportunities: when poor structure leads to wrong projections and alerts for trade, this can give mover advantages to others for booking profit.
- Platform security issues – This method is used to audit the flaws in network and hosting platforms due to codes or UI designs. These can cause a major slowdown and vulnerable opportunities over the blockchain transaction parts.
Top 5 smart contract security audit platforms
- Chainsulting
- Certik
- Solidproof
- OpenZeppelin
- Trail of bits
Costing for smart contract auditing
Costing can be very high depending upon the number of contracts, the platform used to audit as well as the magnitude of the project to be audited. Generally, the average composting for a fairly large project can deal up to $ 10,000.
Bottom line
Concluding the usage of smart contract auditing to save guard huge sum of money over blockchain seems to be the only safest option.
Everything being on technology, that too having worth in million dollars is attractive to hackers and is prone to malicious attacks.
To prevent such cases that can potentially take away your money, spending on auditing and rectifying weaknesses is a better way out.
However, the pocket expenses overhead can sometimes ruin your “the only way out” and therefore make you eligible for prominent losses.
Best practices often need a good bet to save other bucks!
