Smart contracts are quickly becoming a well-known term in blockchain technology, particularly in the Decentralized Finance (DeFi) ecosystem. When considering the transparency of smart contract implementation, it becomes clear to all blockchain users. However, security flaws and vulnerabilities may become apparent at times.
In addition, hackers or cybercriminals may use these possible security flaws to further disrupt a company’s smart contract, resulting in enormous revenue loss and customer data leaks. While most individuals recognize the need for cybersecurity audits, just a few take them seriously. This post will offer a fundamental explanation of smart contracts, why they are crucial to audit, and how you may secure your smart contracts to avoid undesirable circumstances.
Introduction to Smart Contract
A smart contract is a type of Ethereum Account, that runs on blockchain platforms, which consists of a set of programmed agreements of data and functions that are automatically implemented anytime a network attempts to access it for a user-requested transaction.
These transactions are executed through the tokens accepted on the smart contract platform, for example, the Ethereum platform considers ether (ETH) token as an account balance. By making a transaction, users’ accounts can interface with a smart contract and access data. This transaction performs a predetermined operation on the smart contract, granting the user access to the data contained in the smart contract.
Types of Smart Contract
Programming languages such as Solidity and Vyper are used to design, construct and deploy smart contracts via a network. You’ll also need enough ETH for the deployment process (using Gas). Smart contacts are categorized into 4 different parts as per how the developer utilizes them for developing an application.
What is a Smart Contract Audit?
A smart contract audit is a thorough study of a piece of code that allows for interaction with a cryptocurrency or blockchain. The smart contract audit is performed with the purpose of identifying potential flaws and security loopholes/issues in the code and recommending improvements and solutions. Such audits are typically carried out with the Solidity programming language and are available on GitHub. Auditing smart contracts are considered to be an essential checklist for many crypto investors.
For projects in the Decentralized Finance (DeFi) industry where the platform expects to handle transactions worth millions of dollars or a large number of player engagements, a single vulnerability in security may cost one a fortune, conducting a smart contract security audit proves to be a valuable investment.
Though some individuals have begun to recognize the value of audits in cybersecurity, few are interested in delving into the lines of code. However, if you’re considering investing in a project, we recommend conducting a smart contract code review before making a decision.
What is the Need for a Smart Contract Audit?
Smart contract deployment is a frequent source of anxiety for blockchain businesses. An attack, once launched, cannot be reversed due to its irreversible nature. With large quantities of money traded or locked in smart contracts, they become appealing targets for nefarious hacker assaults. Moreover, you run the danger of losing the entire contract as well as the assets affiliated with it owing to security flaws in smart contracts. Some recent and past cyberattacks on Smart Contracts may provide better insight into this scenario:
- As per a report in 2017, due to a serious weakness in their Ethereum smart contract, $150 million in ETH was stolen from a business called Parity Technologies.
- Similarly, a year ago in 2016, a DAO a.k.a Genesis DAO was breached by a hacker(s) who took advantage of a security flaw in the system. In this case, hackers stole $50 million worth of ETH from Genesis DAO’s crowdfunding investors.
- Last year in the month of August one of the biggest robberies in the crypto world occurred, where a group of hackers seized a whopping $613 million in digital currency from the Poly Network corporation. Hackers took advantage of a flaw in the digital contracts used by Poly Network.
All these events indicate one thing — blockchain technologies such as smart contract does have vulnerabilities and are not immune from cyberattacks. Thus, the requirement for the smart contract security audit becomes more essential.
Auditing the smart contract can help you to better optimize code, boost the performance of the smart contract, improve the application security and ultimately safeguard your precious resources from thefts and hacks.
In a recent webinar “The Cybersecurity Vision & Innovation Summit & Awards 2022” hosted by Transformance, Mr. Narasimha Raju SCV (CTO at ImpactQA) gave some valuable insight on smart contract auditing and explained the valuable advantage of auditing for enterprises.
Smart contract security audits assist you in identifying potential system weaknesses. It allows you to address these flaws before a malicious attacker attempts to hack them and contaminate your platform.
How to Protect the Smart Contract?
The high level of security is one of the primary reasons behind organizations opting for smart contracts. It operates as an attorney between two parties participating in a transaction (with an agreement).
Unfortunately, as we already read earlier, there have been numerous cases when platforms based on smart contracts have been compromised owing to poor smart contract implementation during SDLC, inadequate security measures, and vulnerability exploitation.
Smart contract security measures begin before the first line of code is written — during the planning, designing, and development phases — and conclude with protection over cyberattacks and potential vulnerabilities. Here are some tips for protecting smart contracts from assaults and weaknesses:
- Make sure to pay attention to a blockchain security checklist.
- For design, development, security, auditing, and exploitation, use trusted blockchain tools.
- Do automated security scans
- Create a more secure smart contract code by following best practices used by prominent enterprises.
Final Say
Fortunately for investors and users, smart contract audits have now become the gold standard. Because blockchain transactions are irreversible, it is vital to ensure the security of a project’s code. Since the extremely secure nature of blockchain technology makes it impossible to reclaim cash and handle difficulties after the fact, it is preferable to avoid weaknesses at all costs. Hence, the auditing of smart contract systems is essential for every enterprise.
