What is a smart contract security audit?

Summary

Smart contract security audits can also conduct detailed analysis of the project’s smart contracts. These measures are very important to safeguard contractual investment funds. Since all transactions on the blockchain are final, funds cannot be recovered once stolen. Typically, the auditor will examine the code of the smart contract, generate a report, and pass the report to the project team for use. A final report is then issued detailing any outstanding bugs, as well as work done to address performance or security issues.

Introduction
Smart contract security audits are prevalent in the decentralized finance (DeFi) ecosystem. If you invest in a blockchain project, your decision may be influenced to some extent by smart contract code reviews.

While most people understand the importance of auditing to cybersecurity, few delve into the lines of code. Let’s take a look at the methods, tools, and results commonly used in smart contract security audits so you can make more informed decisions.

What is a smart contract audit?
Smart contract security audits examine and comment on the project’s smart contract code. Typically, these contracts are written in the Solidity programming language and provided by GitHub . Security audits are especially valuable if the DeFi project is processing multi-million dollar blockchain transactions or has a large number of participants. Audits typically follow these four steps:
1. Provide the smart contract to the audit team for initial analysis.

2. The audit team submits their findings to the project team for action.

3. The project team makes revisions based on the problems found.

4. The audit team will take into account new revisions and outstanding errors and issue a final report.

For many crypto users, smart contract auditing is indispensable when investing in new DeFi projects. It has become the standard for important projects. Certain auditors have also become industry leaders, increasing the value of their audit work in the eyes of investors.

Why do we need smart contract auditing?
Large amounts of value are traded or locked in smart contracts, making them easy targets for hackers. Even small coding errors can lead to the theft of huge sums of money. For example, the DAO hack on the Ethereum blockchain took about $60 million worth of ether and even led to a hard fork of the Ethereum network.
Since blockchain transactions cannot be reversed, securing the project code is critical. The high level of security of blockchain technology makes it difficult to retrieve funds and solve problems after the fact, so it is best to prevent possible vulnerabilities at all costs.

How does smart contract auditing work?
The process of smart contract auditing is fairly standard among auditors. While each auditor’s approach may be slightly different, the general process is as follows:
1. Determine the scope of the audit. Smart contracts and project specifications are defined by the project (its intended purpose) and the overall architecture. Project specifications help the audit team understand project goals when writing and using code.

2. Provide an initial quotation based on the required workload.

3. Run the test. Its exact nature will vary depending on the audit team, their analytical tools and methods. Typically, both manual and automatic testing methods are used.

4. Create a first draft of the report containing the errors found and provide it to the project team for feedback and subsequent corrections.

5. Consider the actions the team has taken to address the issues raised and issue a final report.

Smart Contract Audit

fuel efficiency
Smart contract auditing does not only focus on blockchain security, but also on efficiency and optimization. Some contracts perform their intended function through a series of complex transactions. Since network gas fees like Ethereum are relatively high, efficient contracts can save a lot of transaction costs .
Optimizing its performance is also a skill indicator for developers. Inefficient steps have more points of failure and should be avoided as much as possible. Smart contracts may not execute when the cost of gas is high, especially when using the low-cost limit of gas.

Contract Vulnerability

Much of the work in an audit involves checking contracts for security vulnerabilities. While some problems are easy to see, many exploits advanced techniques and tactics to drain money. For example, market manipulation can be combined with weak smart contracts to conduct flash loan attacks. To uncover these issues, auditors would begin deciphering the testing process, simulating malicious attacks on smart contracts. Common vulnerabilities include:

Reentrancy problem : when one smart contract makes an external call to another external contract before any effects are resolved. Then, since the original contract’s balance has not been updated, the external contract can recursively call the original smart contract and interact with it in ways it shouldn’t.
Integer overflow and underflow: When smart contract audit companies performs arithmetic operations, but the output exceeds the storage capacity (usually 18 decimal places). This can lead to errors in calculating the amount.
Front-End Trading Opportunities: Poorly structured tickers can provide early warning of buying or selling in the market. This, in turn, allows others to use the information to trade for personal gain.
Platform Security Vulnerabilities
Most audits include looking at the network hosting the contract, and even the API used to interact with the DApp . If a project may be vulnerable to DDoS attacks, or its website UI is compromised, this means that users are actually connecting their wallets to malicious blockchain applications.

What is an audit report?

An audit report is a report issued at the conclusion of an audit. To increase transparency, the project team should share its findings with the community. Most reports categorize issues by severity, such as major, major, minor, etc. The report will also list the status of the issues, as the project will still have time to resolve them before the final report is released.

In addition to the executive summary, the standard report will contain recommendations, examples of redundant code, and full details of where coding errors are located. The project has time to act on the report’s findings before the final version is released.

Where is smart contract auditing available?

Many smart contract auditing services have already developed a reputation for excellence. Two of these are particularly popular, and obtaining an audit from them will require an initial offer and handover information.

Additionally, the vast majority of projects supported by Binance Labs have their contracts audited through CertiK. CertiK publishes a leaderboard of audited projects, complete with safety scores, and you can compare each project. Note that in addition to Ethereum, CertiK also undertakes BSC and Polygon projects.

ConsenSys Diligence

ConsenSys, run by Ethereum co-founder Joseph Lubin, is one of the biggest names in blockchain development in the cryptocurrency industry. At ConsenSys Diligence , the company provides Bsc smart contract auditing. They also provide automated services to check for common errors in Ethereum Virtual Machine (EVM) contracts.

How much does it cost to audit a smart contract?

The exact audit fee depends on the number of smart contracts that need to be checked. Typically, audit fees run into the thousands of dollars. For certain large projects, the cost can easily exceed $10,000. The audit firm that does the audit and its reputation can also affect how much you pay.

Summarize

Fortunately for investors and users, smart contract auditing has become a gold standard. However, if every project has a smart contract audit, it is no longer a simple indicator of value. So learning to read the audit yourself is very important. Even if you lack technical knowledge, it can be helpful to look at the comments and the severity of the potential problem.

When you come across an audit, it should at least be easier to understand its content. As always, when making any investment decision, it’s important to look at the big picture and take all information into account.