What Is a Smart Contract Security Audit?

An in-depth examination of a project’s smart contracts is provided via a smart contract security audit.

These are critical in order to protect the money invested through them. Because all blockchain transactions are final, money that has been taken cannot be reclaimed. Typically, auditors will examine the smart contract code, prepare a report, and distribute it to the project. The previous work done to address any performance or security issues is then summarized in a published final report.

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Security audits of smart contracts are particularly popular in the Decentralized Finance (DeFi) ecosystem. If you’ve decided to invest in a blockchain firm, the outcome of a smart contract code review may have influenced your decision.

Most people understand the importance of cybersecurity audits, but few To help you make better choices, let’s examine the procedures, instruments, and outcomes frequently observed in smart contract security audits.

What is a smart contract audit?

A smart contract audit is a thorough, methodical inspection and analysis of the code used by a smart contract to communicate with a cryptocurrency or blockchain. In order to recommend changes and ways to fix them, this procedure is used to find mistakes, issues, and security vulnerabilities in the code. In general, smart contract audits are required because the majority of contracts involve money or other valuables.

Such checks are difficult since smart contracts frequently interact with one another, and any system connections with third parties run the risk of weakening the system. As a result, the tests are frequently extended to cover any other smart contracts involved in interactions, even those that are engaging with other smart contracts. These checks frequently include both manual code analysis and test execution.

Smart contracts are routinely used to manage large sums of money, and a single fault or vulnerability can result in enormous losses. More specifically, the users and stakeholders of the aforementioned decentralized application may lose all of the ecosystem’s assets.

The auditors’ recommendations are communicated to the project team in advance, and their responses are included in the final report. It is seen as a representation of the project’s sincerity and integrity. For this reason, teams are keen to secure an audit in order to increase the project’s credibility and win user trust.

Usually, these audits are conducted in stages. The team and the auditing group must first agree on the audit’s parameters and scope.

It indicates that the auditors are provided with information on the smart contract’s architecture, design, and other specifics. The testing step follows, during which the auditors test smaller, isolated components first, and then bigger ones.

Additionally, automated bug analysis and detection tools are used to look for well-known flaws in the contracts. Ultimately, auditors comb over the code by hand to determine the developer’s aims and contextualize the findings. Then, the findings and remedies implemented by the team are presented in the report.

The fact that the Ethereum chain split in 2016 was caused by a code vulnerability exploited by an attacker, putting millions of dollars of money at risk, can be used to measure the significance of smart code audits in Ethereum smart contracts.

Why do we need smart contract audits?

Smart contracts are used to transact or store enormous quantities of value, making them appealing targets for hostile cyber assaults. Small coding mistakes can result in the theft of substantial quantities of money. A hard fork of the Ethereum network resulted from the DAO breach on the Ethereum blockchain, for instance, which stole almost 60 million dollars’ worth of ETH.

Making sure that a project’s code is secure is crucial given that blockchain transactions are irrevocable. Because of how difficult it is to recover cash and fix problems after the fact with blockchain technology, it is always better to prevent weaknesses.

How do smart contract audits work?

A smart contract audit follows a procedure that is largely uniform among audit companies. Although each auditor may take a somewhat different approach, the standard procedure is as follows:

1. Establish the audit’s parameters. The project and the overall architecture establish the smart contract and project specifications. A specification aids the audit team in comprehending the objectives of the project when creating and utilizing the code.
2. Provide a preliminary estimate depending on the scope of the work required.
3. Execute tests Depending on the auditing team, their procedures, analysis tools, and techniques, their precise nature will change. Both human and automated tests are typically run.
4. Write a preliminary version of the report that includes the errors you discovered and give it to the project team for comments and further corrections.
5. After considering any steps the team may have taken to address the issues raised, publish the final report.

Smart contract audit methods

Smart contract audit methods are defined in the following categories:

Gas efficiency

No, smart contract audits aim to do more than just make sure that the smart contracts themselves are secure. Additionally crucial factors are optimization and efficiency. Specific contracts require an extensive list of transactions to serve their function. As a result, using effective contracts on networks like Ethereum could result in huge savings in transaction costs.

The developer’s capacity for performance optimization is another indication of their experience. Reducing the number of potential failure locations will result from avoiding ineffective behaviors. For instance, if the gas limit is set too low, smart contracts may not function properly.

Contract vulnerabilities

Finding security issues in contracts makes up the majority of audit work. Even while certain issues are obvious, many attacks require complex strategies and preparations in order to take money. Attacks involving flash loans, for instance, can profit from market manipulation and shoddy smart contracts. As a result, the auditors simulate harmful attacks on the smart contract to start the break-testing process. Some of the most typical include the following:

1. Reentry problems

A smart contract has the ability to call another external contract without first considering how that call may affect other smart contracts. Additionally, the external contract may recursively call the original and interact with it in ways that it shouldn’t be allowed to because the balance of the original smart contract has not yet been updated.

2. Overflows and underflows of integers

When the result exceeds the storage limit following an arithmetic operation, an integer overflow or underflow occurs (usually 18 decimal places). The figures you’re using might be inaccurate as a result.

3. Front-running opportunities

By examining poorly written code, one can get a head start on the competition. Others are then able to gain from the knowledge as a result. This may happen in nft smart contracts.

What is an audit report?

The audit report is delivered at the end of the audit operation. In the sake of transparency, projects are expected to share their findings with the community. Most reports categorize problems as critical, major, minor, and so on. Because projects are given time to address issues before publishing the final report, the status of the issue will be included in the report.

A typical report will include recommendations, instances of redundant code, and a thorough breakdown of where coding errors have occurred, in addition to an executive summary. Before the final version is published, the project is given time to take action on the report’s recommendations.

Where can I get a smart contract audit?

Many smart contract audit companies are now well-known for their work. Two are especially well-liked, and receiving an audit from them will involve a preliminary quote and information transfer.

1. Hacken

Hacken is a cybersecurity firm that guards Web 3.0 firms from hacking attempts that could cost them money and reputational damage. Since its founding in 2017, Hacken has approved 900+ projects, including cryptocurrencies, crypto exchanges, platforms, launchpads, and other related things. Audits, pentests, and bug bounty schemes for smart contracts are the major services offered by Hacken.

The largest cryptocurrency exchanges, including FTX, KuCoin, OKX, Huobi, and Gate.io, trust Hacken, and its network of partners also includes >90 other well-known companies, including CoinMarketCap, CoinGecko, VeChain, InsurAce.io, Solana Foundation, IoTex, Avalanche, and Polkastarter.

The Hacken team has created a clear and thorough mechanism for auditing smart contracts. Before the audit, clients can view this document to fully understand the testing procedures that will be used and to share any suggestions or potential concerns.

2. Certik

A blockchain security business is called CertiK. Modern Formal Verification technique for blockchain networks and smart contracts has been developed by it as a pioneer. In 2018, professors from Yale and Columbia universities started the business. Its main goal is to protect the online environment.

According to the team’s website, it has performed more than 1,800 audits worldwide using well-known standards. Among the leading cryptocurrency exchanges, CertiK has protected include Binance, OKEx, and Huobi. For instance, the Binance Accelerator Fund uses CertiK audits to guarantee the security of the top platforms it invests in.

More than 100 top-tier blockchains and DeFi protocols have been serviced by CertiK. Binance, Tera, Bancor, Shapeshift, and Blockstack are just a few of them. Among other things, CertiK has audited the smart contracts of the Binance Smart Chain.

Your smart contract’s code and security are thoroughly analyzed by Certik. After that, it locates weaknesses and offers suggestions. When you submit a quote request on CertiK.io, a member of the team will get in touch with you to schedule the audit.

3. Chainsulting

Leading security audit company Chainsulting checks the security and consistency of the code in smart contracts. In addition to audits, they also provide consultancy and software development. The business started operating in 2017 as a consultancy and development company for blockchain technology.

At its corporate offices in Germany and Australia, the company has more than ten employees. By employing a cutting-edge method of auditing, Chainsulting sets itself apart from the competitors. The business does top-notch smart contract security audits that help identify weaknesses. The workflow’s multiple steps help to prevent DeFi hacking.

For industry-leading blockchains like Algorand, Ethereum, Binance Smart Chain, and Solana, the company does code audits. It assists them in reducing risk and fostering transparency and trust. Along with many other leading DeFi and crypto projects, they also examine and protect the smart contracts of DAI, 1Inch, POA Network, Unicrypt, and a number of others.

User cash worth $100 billion are stuck in several DeFi systems thanks to chafing. The team behind the top audit company relies on its deep technical expertise in the blockchain industry. This is done so that it can provide superior audit solutions that are adapted to the clients’ shifting business requirements.

4. OpenZeppelin

An open-source tool for creating safe decentralized applications is called OpenZeppelin (dApps). The framework comes with the equipment required to build and operate Web3 programs. In addition, any size of organization can use OpenZeppelin’s audit services to discover the best practices in the sector.

OpenZeppelon’s clients include prestigious organizations like the Ethereum Foundation and Coinbase. Its goal is to defend the open economy by giving Ethereum projects security, dependability, and risk management. It implements security measures and conducts security audits on your behalf to guarantee the safety of dApps. After spotting potential issues in the code, they offer a report with best practices and suggestions to fix the system’s flaws.

5. SolidProof

A German audit company called SolidProof evaluates blockchain applications and smart contracts to look for vulnerabilities using both manual and automated tests. After the procedure is finished, the business provides an audit report that categorizes the vulnerabilities discovered and makes suggestions for fixing them.

Solidproof will seek to confirm customers’ identities and evaluate the nature of their activities for the DeFi project’s KYC checks. They will also assess any risks involved and make sure the clients have legal access to funds.

Additionally, Solidproof performs audit checks on all DeFI projects. As a developer, you want to feel confident that your project is progressing well and that the likelihood of a DeFi hack is low.

Therefore, before creating an audit report, Solidproof analyses your code and the project for potential vulnerabilities.

SolidProof collaborates with your development team to reduce any risks identified in the audit report, which is one of its best features. Because of its individualized services, DeFi project developers are able to reduce the majority of the risks associated with their projects and build trust with their clients.

Notably, in less than a year, Solidproof performed over 500 smart contract audits and KYCs.

How much does a smart contract audit cost?

The quantity of smart contracts that need to be audited will determine how much an audit will cost. Using smart contracts simplifies the construction of an unbreakable agreement with predetermined ground conditions. Despite this, numerous companies are starting to test cutting-edge technology for a variety of reasons.

These companies want to benefit from being among the first to implement blockchain according to their unique needs and offer their customers better services.

However, developing a smart contract is not a particularly cheap process; it can cost anywhere from 7,000 USD for a basic smart contract and 45,000 USD for a complex one. The cost of producing smart contracts for large businesses that need a concentrated attention on their growth could go up to $100,000 USD.

Furthermore, this pricing does not account for the installation of smart contracts on the mainnet, therefore the actual cost of the labor can be substantially higher.

In conclusion

It is obvious that smart contract audit could be a fruitful technique for enhancing smart contracts’ functioning. There were security flaws in what appeared to be nearly impenetrable. Depending on the platform or tool you choose to employ, the cost of the smart contract audit may change significantly.

The effectiveness of smart contract audits is also influenced by a variety of other factors, including communication between the project team and the audit team. To increase their ability to effectively use smart contracts, businesses should focus on recognizing the problems with smart contract audits.