Smart contracts are among the best inventions of the 21st century, enabling people to transact seamlessly without intermediaries. However, technical vulnerabilities expose smart contracts to cyber theft and tampering. An audit aims to examine a contract for such vulnerabilities and fix them before deploying it for public use. This article will explain a smart contract audit, how it works, and why you should do it.
What Is a Smart Contract?
A smart contract is a digital program stored on a blockchain that automatically executes based on predefined conditions. One of its main applications is executing financial transactions based on preset terms, with all participants satisfied with the outcome without any intermediary’s involvement.
Smart contracts have become more popular than ever because of the decentralized finance (DeFi) sector. People now have access to digital currency exchanges, wallets, and other apps that enable them to transact seamlessly.
What Is a Smart Contract Audit?
An audit is an extensive evaluation of a contract to detect and fix vulnerabilities. Blockchain programs are fragile, and any little technical error leaves an opening for hackers to steal funds or sensitive information. Developers don’t want to give hackers such a chance, so they get their contracts audited by experts.
Why Is It Needed?
The primary reason for audits is security. Auditors examine contracts to identify and fix errors that could be exploited to steal user funds or data. Owing to technical vulnerabilities, the blockchain sector has seen its fair share of massive hacks. For example, hackers stole the equivalent of $615 million in tokens from the Ronin Network, leaving many users unable to access their funds.
A smart contract audit involves blockchain and cybersecurity experts digging deep into a contract’s codebase to identify bugs. After identifying these bugs, they help to create solutions and fix them before deploying the contract for public use.
Auditors also look for ways to improve a blockchain program’s performance, e.g., increasing transaction speed and reducing fees.
What Is the Auditing Process?
An extensive audit comprises these steps:
1. Documentation
The developer provides detailed documentation about their blockchain program, including whitepapers, codebase comments, manuals, user guides, and everything that gives valuable information about the program. Thorough documentation helps the auditors understand the program’s purpose and how to approach their review.
2. Code Freeze
The developer freezes their program’s codebase, avoiding making any changes while auditors review it.
3. Automated Testing
The auditor uses automated tools to test the program against known vulnerabilities. Common blockchain vulnerabilities include reentrancy, access control flaws, arithmetic miscalculations, time manipulation, and front-running. Automated tools feed the program with random data to see how it performs in unexpected conditions. Any vulnerabilities are documented.
4. Manual Testing
The assigned auditors review every relevant aspect of the contract’s codebase to identify vulnerabilities based on their knowledge or experience. Automated tools are limited in the errors they can detect. Manual testing is critical for identifying errors that aren’t obvious or common in the blockchain sector.
5. Initial Report
The auditing firm prepares a formal report detailing the identified errors and providing suggestions for fixing them. The developer receives this report and reviews it to implement the suggested fixes.
6. Final Report
The auditing firm reviews the program once again to certify that the developer has implemented the suggested fixes. If so, it prepares a report ascertaining that the program has been extensively audited. This report is usually posted publicly to boost confidence and drive user adoption for the smart contract.
The key for any blockchain developer is to choose a skilled and experienced auditing firm that’ll thoroughly review their program to detect and fix vulnerabilities.
