The Importance of a Smart Contract Audit
A smart contract audit is a process of finding out the vulnerabilities and errors of a smart contract. It helps to determine whether a smart contract has any bugs or vulnerabilities that need to be fixed before deploying it to public use. It is usually conducted before the release of a new contract to mainnet or in case of any upgrades to the code itself or the business logic of the contract.
Security Flaws in a Smart Contract
Smart contracts are essentially digital agreements connecting various parties and dependencies. They contain all the terms of the agreement as an irreversible code. While some companies develop their own smart contracts, other firms outsource them to third-party developers.
The smart contract audit process is important for the security of blockchain applications. It helps to identify potential weaknesses and resolve issues. This can also help developers improve code quality.
Hackers can exploit vulnerabilities in the code to take control of a contract. For example, a “re-entrancy” vulnerability allows a malicious actor to call a function multiple times. This can lead to unexpected results – and the DeFi space already saw numerous exploits that used re-entrancy vulnerability. Similarly, access control vulnerabilities allow an attacker to gain access to private values.
There are many reasons why a smart contract needs an audit. One is security protection – guarding a company against exploits and preventing its reputation from being destroyed. Another reason is to help optimise the code.
Conducting a Smart Contract Audit
For a smart contract to perform its intended function, it needs to be battle-tested and error-free. Besides running automated tests, developers also reach out to auditing firms or standalone auditors to perform a thorough security audit. In addition to highlighting potential security flaws, an audit will suggest ways to improve the code’s overall security.
The cost of a smart contract audit depends on various factors – the project’s scope, how famous the audit firm is, the timeframe for the audit, etc. The main factor is the size and complexity of the code and business logic behind the contract.
In general, the audit is performed on the code release candidate as this version is the closest to the actual product intended for users. At this stage, developers and auditors need to stay in close contact to share and discuss the findings – vulnerabilities or possibilities for code optimization’s. When auditors give a green light on all the fixes performed by the development team, the final report is prepared and released to the public and the smart contract is also ready to be launched for everyone to use.
After the smart contract audit is completed and the code is released to the public, a lot of projects launch bug bounty programs to outsource and incentivize community members and third-party developers to continue with security checks. And while it’s one of the easiest ways to improve overall project security with minimum effort from the development team, there are other ways to approach the security of a live smart contract.
One of them is using risk management tools and platforms to oversee project health – both in terms of smart contract functionality and business logic. There are various platforms in the DeFi security space like Apostro and Gauntlet to help projects guard against economic exploits and overall code security.