WHAT IS A SMART CONTRACT SECURITY AUDIT?

Smart contracts are adaptable instruments that can track the movement of physical things and intellectual property and facilitate and verify financial transactions. Because smart contracts have the authority to allocate high-value resources between complicated systems and are largely autonomous, security and consistency are critical.

Therefore, understanding the probability and critical nature of potential contract failures or discovered errors is essential to smart contract security. A smart contract security audit takes a deep look at a project’s smart contracts and is necessary to protect the money invested through them.

Do you know the importance of smart contract audits to find the security vulnerabilities in smart contracts?

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 blockchains. Well, blockchain is basically focused on offering optimal levels of security, right? When you take a look at the Ethereum blockchain network, it has enormous computing power to ensure security. However, blockchain networks can be secure, while the applications running on them may not be as secure as expected.

Blockchain applications use smart contracts to interact with the blockchain, and smart contracts have deep security vulnerabilities. This is where you need 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. With the help of such an audit, smart contract developers could easily identify vulnerabilities and bugs before the implementation of smart contracts.

Third-party entities typically perform smart contract audits to ensure a thorough review of the code. On the other hand, companies can choose professional smart contract auditors to carry out the auditing process.

It is very important to test the code thoroughly before implementing the smart contract. Why? Once you write the smart contract on the blockchain, it is impossible to change the code. 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, inadequate auditing processes could also expose you to risks such as personal data loss or data theft.

Importance

Today, one of the most pressing issues for implementing smart contracts is security. There are concerns about inefficiency, security, and misbehavior because ignoring them when using a blockchain network to create smart contracts could lead to extraordinarily high additional costs.

Also, minor coding glitches can result in the theft of large amounts of money. The DAO breach of the Ethereum blockchain, for example, seized around $60 million worth of Ether and resulted in a hard fork of the Ethereum network.

As a result, companies are concerned about their implementation due to the irreversible nature of smart contracts. Also, due to security flaws in smart contracts, you risk losing the entire contract and its related assets. Therefore, smart contract auditing has become a critical requirement in recent years for the following reasons:

• Avoid costly mistakes: Auditing your code early in the development lifecycle can help you avoid potentially fatal failures after release.
• Expert review: To eliminate false results, veteran security auditors manually verify your code.
• Prevent security attacks: As you write and modify code, keeping an eye out for any security flaws helps prevent security attacks.
• Enhanced security: Smart contract security auditing assures owners of decentralized products that their code is secure.
• Continuous security evaluation: the smart contract audit process allows you to carry out continuous security evaluations, offering to improve your development environment.
• Analytical reports: You receive an executive summary, vulnerability details, and mitigation tips in a vulnerability report.

How to perform a smart contract audit?
A smart contract auditing service provides checks for known vulnerabilities that apply to the particular business logic of each smart contract. It also assesses conformance to the Solidity Code Style Guide and verifies that the smart contract is free of logical and access control issues. Standards for smart contract security audits vary from project to project. Smart contracts can be audited using manual or automated approaches, as explained below.

manual audit
Manual auditing involves a group of experts/auditors examining each line of code for compilation and re-entry issues. This can also help detect other security vulnerabilities that are often overlooked, such as poor encryption practices.

Manual code analysis can take two forms:

• Perform a free exploratory check based on the developer’s personal experience.
• Confirm a standard list of failures.

Because it detects hidden flaws, such as design difficulties rather than just code bugs, this method is considered the most accurate and comprehensive.

Manual inspection is a necessary requirement to improve detection of potential smart contract code vulnerabilities.

An experienced audit team evaluates the selections to confirm the performance of a project according to the desired functionalities. Based on their observations, smart contract auditors can offer reliable recommendations to improve the smart contract project team.

Automated audit
In contrast, the automated smart contract auditing approach uses error detection software, which helps smart contract auditors pinpoint the exact location responsible for errors. Projects that require faster time to market often prefer an automated approach because it helps find vulnerabilities much faster. However, automated software may not always understand context and may miss vulnerabilities when checking code.

Automated analysis tools in smart contract auditing help streamline the auditing process by improving the ease of identifying general issues in the code.

At the same time, they can also facilitate freedom from dependency on human auditors while ensuring reduced response time. Automated analysis allows auditors to focus their efforts on new and complex vulnerabilities.

While automated analysis can definitely optimize the cost of smart contract auditing, automated analysis tools for Solidity are currently in the early stages of development. Therefore, it will take a long time to achieve the desired perfection for smart contract audits.

Also, automated analysis tools are not aware of the writing context of a specific code. As a result, such tools could also frequently report false positives along with incorrectly asserting the existence of problems. At this point, you will have to refer to the analysis manual for each identified vulnerability.