Smart contracts are the backbone of blockchain networks. They ensure trustless transactions and contribute immensely to the security of the blockchain. Smart contracts are also being increasingly deployed in rising crypto projects like DeFi. However, a common factor across all smart contract deployments is the need to audit the smart contract structure.
We will discuss the concept of smart contract auditing, why it is essential, and the steps involved in executing it.
What is Smart Contract Auditing?
Smart contract auditing is the process of analysing a smart contract’s structure and code to detect defects, bugs, or security vulnerabilities. The primary aim of the audit is to highlight these errors and suggest ways to eliminate them. Many of these audits are conducted by audit companies. Some audit companies involved in Smart Contract audits include Certik and ChainSulting.
Why are Smart Contract Audits Important?
Smart contracts anchor crypto transactions worth millions of dollars. Essentially, a bug in the smart contract’s code could trigger a significant loss for users. A similar situation occurred in 2020 when Harvest lost $24 million to hackers who exploited the platform’s smart contract vulnerabilities.
Another factor that makes smart contract auditing important is the badge of credibility it gives blockchain projects. When certified auditors analyse a project’s smart contract, they often issue a report on their findings. An excellent report indicates that the project is worthwhile and can be trusted. This is why founders and developers are keen on auditing their smart contracts.
Steps in Smart Contract Auditing
- Specification Agreement: The first step in smart contract auditing is for the auditing company to engage with the project’s developers on the smart contract’s specifications. In turn, the developers provide the design, structure, features, and purpose of the smart contract to the auditors. This step is crucial because it helps properly contextualise and interpret their findings.
- Testing: After retrieving the necessary information, the auditing company tests the smart contract’s architecture. Typically, auditors evaluate individual and collective functions within the smart contract. One major trend auditing firms have started to adopt is analysing the primary smart contract and other smart contracts it interacts with. This is because hackers can easily exploit a smart contract by manipulating the smart contract it interacts with. This broad inspection scope helps improve the detection of vulnerabilities in the smart contract’s code.
- Report Issuance: After evaluating the smart contract’s architecture, the auditing firm communicates its findings in a report. However, this initial report is often not made public. It is merely used to suggest possible improvements to the developers. After implementing these improvements, the auditor tests the structure again and issues its final report.
Conclusion
Trust and security are the two most vital factors for any blockchain project. Your users must trust that your systems are not susceptible to hacking attacks and that their funds are safe. Smart contract auditing is a way to establish credibility for your project and convince users that your network is secure.
