The audit of the smart contract explained
Smart contracts are flexible tools that can track the movement of physical things and intellectual property and help with and verify financial transactions. Because smart contracts can move high-value resources between complex systems and are mostly self-running, security and consistency are very important.
For smart contract security, it is important to know how likely contract flaws or found mistakes are and how important they are. A smart contract security audit is a thorough look at a project’s smart contracts that is needed to protect the money that has been put into them.
All transactions on the blockchain are permanent, so if money is stolen, it can’t be gotten back.
So, the smart contract audit method focuses on looking at the code that supports the terms and conditions of the smart contract so that developers can quickly find vulnerabilities and flaws before deploying smart contracts with the help of such an audit.
This article will talk about the main flaws in smart contracts and answer questions about how smart contract audits are done, why they are important, and how to become a smart contract auditor.
Why is it important to do a security audit on the smart contract?
Security is one of the most important issues for smart contracts right now. There are worries about inefficiency, security, and bad behavior because ignoring them when using a blockchain network to make smart contracts could lead to very expensive extra costs.
Also, even small mistakes in the code can lead to the theft of large amounts of money. The DAO breach on the Ethereum blockchain, for example, led to a hard fork of the Ethereum network and the theft of about $60 million in Ether (ETH).
Because smart contracts can’t be changed, businesses are worried about putting them into place. Also, because smart contracts don’t have perfect security, you could lose the whole contract and all of its assets. So, auditing smart contracts has become a must in the last few years for the following reasons:
• Avoid mistakes that cost a lot of money. If you check your code early in the development process, you can avoid flaws that could be fatal after launch.
• Expert review: Experienced security auditors double-check your code by hand to get rid of false results.
• Prevent security attacks: As you write and change code, keep an eye out for any security flaws. This helps prevent security attacks.
• Better security: A security audit of smart contracts lets the owners of decentralized products know that their code is safe.
• Ongoing security checks: The smart contract auditing process lets you do regular security checks, which can help improve your development environment.
• Analytical reports: In a vulnerability report, you’ll get an executive summary, details about the vulnerability, and advice on how to fix it.
How to do an audit of a smart contract?
A smart contract audit service looks at the business logic of each smart contract to see if it has any known flaws. It also checks that the smart contract is in line with the Solidity Code Style Guide and that there are no problems with logic or access control. Audits of the security of smart contracts have different standards from one project to the next. Auditing smart contracts can be done by hand or automatically, as we’ll talk about below.
Manual auditing
In manual auditing, a group of experts or auditors go through each line of code to look for problems with compilation and re-entry. This can also help find other security flaws that are often missed, like bad encryption practices.
There are two ways to analyze code by hand:
This method is thought to be the most accurate and complete because it can find hidden bugs like design problems as well as code errors.
Automated auditing
On the other hand, automated smart contract auditing uses software to find bugs, which helps smart contract auditors find exactly where errors are happening. Projects that need to get to market faster often choose an automated method because it helps find flaws much more quickly. But automated software might not always understand the context, and when checking code for vulnerabilities, it might miss some of them.
Putting code errors into groups
Each source code flaw is ranked by how serious it is, taking into account what the exploit could do:
Difficulty of exploitation
Another important thing about each flaw that is found is how hard it is to take advantage of it:
How a smart contract audit works
A smart contract audit follows a very standard process, but each smart contract auditor may do things differently. This is how things usually work:
Collecting models of code design
Auditors collect the code specifications and look at the architecture to make sure that third-party smart contracts can be guaranteed to work together. This helps auditors figure out what the project is about and what its goals are.
Run unit tests
Then, auditors use test cases to check how each function of a smart contract works. Audit specialists use both manual and automated tools to make sure that unit test cases include the smart contract’s overall code.
Choose an auditing method.
Since a manual audit is more effective than an automated audit, auditors often look at smart contracts without using software. With this method, it’s easy to find attacks like “front-running.”
Draft the initial report
After the audit is done, the auditors write down the mistakes they found in the code and tell the project team how to fix them. Some companies that offer smart contract services have a team of experts who help fix every bug they find.
Put out the final report on the audit.
After the bugs have been fixed, the auditors publish the final report, taking into account what the project team or outside experts did to fix the problems that were brought up.
Key vulnerabilities in smart contracts
In this section, we’ll talk about the most common security flaws in smart contracts:
Timestamp dependency
The smart contract’s execution environment is on the miner’s side, which is different from most programs. When a contract’s logic depends on the current time, a miner can change the current time to change how the contract is executed and reach a goal that was set before.
Errors in function visibility
In Solidity, a function’s visibility property is set to public by default. So, if a developer forgets to set a private function’s visibility, anyone can use it. For instance, anyone can call the Destroy function to immediately end the contract.
Attacks on reentrancy
The reentrancy attack is one of the most dangerous ways to break a Solidity smart contract. Reentrancy problems could be caused by a developer who doesn’t care. A reentrancy attack is when a function makes an outside call to another contract that is not trusted. Then, in an attempt to steal money, the unreliable agreement calls back to the original function.
Random number vulnerability
An attacker can correctly guess a contract’s random number if it uses a variable that is known to the public as a seed.
Failure to tell the difference between people and contracts
If you don’t figure out if the smart contract caller is a person or another contract, it could lead to things you didn’t expect. For example, a hacker can make money through the airdrop function by correctly guessing the block in the popular game Fomo3d. This is the same as correctly guessing a contract’s timestamp.
Spelling mistakes
Most of the time, constructors are used to start a contract and figure out who owns it. During programming, the compiler would not notice that the function was misspelled. This would make the function public, so that anyone could call it.
In Solidity, the state variables of a contract are set by using a function. The function is called when a contract is put together for the first time, and it can be used to set initial values. There are two different kinds of constructors: internal and public. Also, the Solidity code is compiled with a Solidity compiler, which makes byte code and other things that are needed for deploying smart contracts.
Consider the case where the function of the HelloWorld contract is misspelled as Helloworld. Any user can run the Helloworld function to change who owns the contract.
How much does a smart contract audit cost?
Smart contract auditing costs between $5,000 and $15,000 on average, depending on how complicated the code is. However, in some cases, the price can be much higher. So, the auditing firm makes a report that explains the code’s possible flaws and suggests other ways to make it more secure.
The experts also look at how contracts work to see how they show current security trends. But why do audits of smart contracts cost so much? A smart contract auditor looks at the code line by line. This is a difficult and time-consuming job, so smart contract audit services are very expensive.
Even though it costs money, auditing smart contracts is necessary to fix flaws in the code that could lead to much higher costs and security holes, as was mentioned in the last section. So, how long does it take to do an audit of a smart contract? Depending on the project, the size of the smart contract, and how soon it needs to be done, the smart contract audit process (first audit) can take anywhere from two to fourteen days.
For big projects or protocols, the audit could take up to a month. After the initial audit is done, the client gets suggestions for how to fix the problems. The client decides how long it will take to fix the problems. After that, a cleanup check is done, which usually takes one day.
How to become an auditor of smart contracts?
In order to audit a smart contract, you need to know how to program because you have to check the code line by line. If you have never programmed before, you should know that your code critiques won’t be useful for years.
You need to know what Ethereum blockchain and Solidity are and how they work (the programming language used to write Ethereum smart contracts). Start by reading the Ethereum documentation and taking classes on the basics of blockchain technology. Using the blockchain or programming language is another great way to learn it.
It’s important to know that different programming languages are used for each blockchain. Please read our guide if you want to learn more: A guide for newcomers to the most popular blockchains used in developing NFTs.
When you are auditing decentralized finance (DeFi) projects, it is helpful to have a background in finance. Most DeFi projects use standard finance terms. For an auditor to audit a smart contract well, they need to know basic finance terms like crypto derivatives.
Smart contract auditing firms
Now that we know how important the smart contract auditing process is, let’s look at some of the organizations that do smart contract auditing to keep the crypto ecosystem safe.
CertiK was the first company to do security audits of smart contracts (a web and blockchain security organization). CertiK has checked up on BNB Smart Chain, Bancor, and Huobi. Also, before the Binance accelerator fund invests in a project, CertiK smart contract audits are done.
Chainsulting is a well-known auditing firm for smart contracts. It was started in 2017. Its top clients include 1inch, MakerDAO, and other well-known DeFi protocols. OpenZeppelin also does audits for Coinbase and the Ethereum Foundation, which are two of the most well-known blockchain companies. Through its modular contract templates, the platform also makes sure that Ethereum smart contracts are made in a safe way.
