What is Smart Contract Audit?

What is Smart Contract Audit?

Well, the blockchain was mainly focused on providing an optimal level of security, wasn’t it? When you look at the Ethereum blockchain network, according to Coinmarketrate.com, it has a huge computing power to ensure security. But there are applications.

Blockchain applications use smart contracts for interaction, but smart contracts have serious security vulnerabilities. And this is exactly where we will need an audit of smart contracts.

What are smart contracts?

Before learning how to audit smart contracts, let’s briefly understand what it is.

Smart contracts are computerized transaction protocols designed to fulfill the terms of a contract. First of all, they are designed to fulfill general contractual conditions, while reducing accidental exceptions and the participation of intermediaries.

Currently, smart contracts serve a wide range of use cases, such as supply chain management, ICO and voting in elections.

So, what’s the problem?

Like any other software, smart contracts have vulnerabilities. Therefore, their audit is necessary to ensure that they do not have security problems. At the same time, the audit also ensures that smart contracts are optimized to ensure an ideal level of performance.

Defining a Smart contract audit

The most important aspect of understanding the smart contract audit process is its definition. The audit process focuses on checking the code used to confirm the terms of the smart contract. With the help of such an audit, developers can easily identify vulnerabilities and errors even before its deployment.

As a rule, third-party organizations audit smart contracts to ensure a thorough analysis of the code. On the other hand, enterprises can choose professional auditors with smart contracts to conduct an audit.

Before deploying a smart contract, it is very important to thoroughly test the code. Why? After you write a smart contract in the blockchain, it will be impossible to change the code. Its deployment without proper audit can lead to undesirable circumstances, such as inconsistencies in the desired performance of the contract. At the same time, inadequate audit processes can also expose you to risks such as loss of personal data or data theft.

The importance of audit

Having found the answer to the question “what is an audit of smart contracts?”, it is reasonable to think about its significance. Security is one of the serious problems when implementing many solutions at the present time. Concerns about inefficiency, security issues, and inappropriate behavior can lead to extremely high additional costs.

Companies are concerned about the implementation of smart contracts, given their irreversible nature. In addition, there is also a risk of losing the entire contract and its associated assets, due to security vulnerabilities. Thus, the audit of smart contracts is becoming an important requirement at the present time for the following reasons:

  1. Better code optimization
  2. Improved performance
  3. Enhanced wallet security
  4. Protection against hacker attacks

So, now it becomes clear that the audit of smart contracts can be very useful for:

  • Owners of decentralized application products
  • Individuals who need to gain the trust of investors, stakeholders, participants, etc.
  • Creators and organizers of ICO startups
  • Developers

With so many important advantages for the security of smart contracts, it is important to learn how to conduct an audit immediately. Audit skills can help businesses protect themselves from attacks, such as:

  • Repeated attack
  • Changing the order of attack
  • Attack on a short address
  • Overflow and insufficient filling
  • Replay the attack

Basics of Smart Contract Audit

While you may have started wondering about the cost of auditing, it’s important to understand the basics first. So, what will be the main structure of the audit?

One of the first areas in the smart contract audit structure should address common problems, such as re-entry errors, compilation errors, and stack problems.

Another important area that should be focused on during the audit concerns the identified errors and security problems in the smart contract host platform. In addition, auditors should also focus on testing the smart contract for a break, modeling various attacks on the contract.

Smart contract audit is generally divided into manual code verification and automatic code analysis. Manual code review is focused on the team evaluating each line of code to identify any possible problems with compilation, security, and re-entry.

Most importantly, manual code verification will pay more attention to identifying security vulnerabilities. On the other hand, automatic code analysis for smart contract audit provides significant time savings. In addition, automatic code testing also allows for improved and comprehensive penetration testing for faster detection of vulnerabilities.

Audit work

Although you can discover different possible approaches to auditing smart contracts using various tools, it is important to know how auditing works. It includes an in-depth evaluation of smart contracts of blockchain applications.

The audit focuses on correcting design problems, security vulnerabilities, and code errors. Professional auditors will usually offer you a detailed roadmap to help you better understand the process. In the ideal workflow for auditing smart contracts, you can find

  • Specification Agreement

The main factor in the audit process is the achievement of an agreement on the specification of smart contracts. The specification and other accompanying documentation provide a clear explanation of the architecture, the build process and the design options of the project. As a rule, you can find the specification documented in the project’s README file.

It is important to note that official documents and documentation lines can be reliable tools for explaining certain sections of code. However, they do not serve as a substitute for a well-documented specification. The lack of a specification will leave auditors without an idea of the desired and actual operation of the code. Therefore, the first stage of the smart contract audit begins with the full project specification.

  • Testing process

Without delay, you can immediately proceed to the testing process as part of the smart contract audit. In fact, testing is one of the important factors that maximize audit costs. Testing also offers simple and easy approaches to detecting errors. You can use various options, such as unit tests for individual functions or integration tests focused on the problems of larger code.

Improved testing coverage can help reduce the number of errors that can be easily eliminated. In addition, tests also help to ensure that developers confirm the desired features and performance of the project

  • Automatic analysis

After you finish the testing process, you will probably move on to the audit analysis stage. The demand for secure smart contract codes has been increasing significantly recently. Consequently, the need for software for automatic error detection also increases significantly.

Many symbolic execution tools are built according to a scheme focused on common vulnerabilities that you can detect in Solidity smart contracts. Automatic analysis tools can evaluate the program to determine the input data that triggers the execution of each part of the program. Automated analysis tools help simplify the audit process by making it easier to identify common problems in the code.

Although automated analysis can definitely optimize the costs of smart contract auditing, automated analysis tools for Solidity are currently in the early stages of development. Thus, it will take a lot of time to achieve the desired audit perfection.

  • Manual analysis

The tools of automatic analysis in the audit of smart contracts have many advantages. They can easily help in identifying common vulnerabilities. On the other hand, they lack an understanding of the developers ‘ intentions. Therefore, manual verification is a necessary requirement to improve the detection of possible vulnerabilities in the smart contract code.

An experienced team of auditors evaluates the specification to confirm the implementation of the project in accordance with the desired functionality. Based on their observations, the auditors can offer reliable recommendations for improvement for the project team.

  • Audit report

The final stage of the audit of smart contracts is the creation of an audit report. Auditors should prepare a detailed audit report after completing the tests, automated and manual analysis. Most importantly, the audit team and the project team should sit down to discuss the conclusions of the report. The discussion can help the project team understand the problems and vulnerabilities of smart contracts, along with the recommendations of the audit team.

Summing up

In conclusion, it is quite obvious that the audit of smart contracts can be a promising tool for improving their functionality. What seemed almost impenetrable had some security vulnerabilities.

The cost of such an operation can vary significantly depending on the platform or tool that you choose to use.

Many other factors also affect the effectiveness of the audit, for example, communication between the project team and the audit team. However, enterprises should work to identify problems in order to increase their efficiency when using smart contracts.