Smart contracts are the backbone of decentralized finance (DeFi) protocols, which is why it is a must that there are no inaccuracies in smart contracts and that they do not show any vulnerabilities. Cross-checking the functions of every smart contract is an important aspect of every blockchain-based project. As businesses are using automated processes for handling finances, the risks of hacking and data theft are increasing day by day — this can be solved by a well-strategized Smart Contract Security Audit.
Defining Smart Contract Security Audit
Smart contracts made their way into the blockchain space after Bitcoin was launched. But it is only after the commencement of Ethereum that increases the use-cases associated with smart contracts. A “smart contract” is simply code and data residing at a specific address on a blockchain network, programmed to execute functions. With the rising user base for smart contracts, vulnerabilities associated with them are coming into the limelight. A security audit must be performed before any smart contract is released on the blockchain.
A smart contract security audit provides a detailed analysis of a project’s smart contracts. These are important to safeguard funds invested through them. As all transactions on the blockchain are final, funds cannot be retrieved or reversed should they be stolen. Typically, auditors will examine the code of smart contracts, produce a report, and provide it to the project for them to work with. A final report is then released, detailing any outstanding errors and the work already done to address performance or security issues.
For many crypto users, especially those tenured ones, smart contract audits are essential when investing in new DeFi projects. It has become a standard for projects that want to be taken seriously. Certain audit providers are also seen as industry leaders, making their audits more valuable in investors’ eyes.
How is a Smart Contract Security Audit performed?
Auditing smart contracts involves an in-depth evaluation of the smart contracts of blockchain applications. The underlying methodology of a smart contract audit is relatively standard among audit providers. The following are the steps involved in the smart contract audit process.
1. Gathering of Requirement
It contributes to determining the audit scope, intended business behavior, overall architecture, and project’s goal. Auditors must have access to documents such as the business requirement document, project’s whitepaper/ yellow paper, technical specification document, smart contract code via GitHub commits, and others.
2. Unit Testing
Here, writing unit test cases is the developer’s job. While, the auditor test runs unit test cases, determining if the smart contract is functioning as planned. At this stage, smart contract auditors use auditing tools and testnet, ensuring unit testing covers the maximum risk involved.
3. Manual Auditing
It is the most crucial aspect of the auditing process. The auditor scans the code line by line for vulnerabilities. Later, the auditor deploys auditing tools such as Mythril, slither, mythx, scribble, and others for thorough scrutiny of the code. Auditors advise smart contract changes based on vulnerabilities and code optimization.
4. Initial Reporting
Following manual and automated audits, an initial report highlighting issues and their severity levels is compiled. Furthermore, the security team provides explanations for issues with the smart contract and its severity levels.
5. Code Refactoring
At this stage, auditors directly collaborate with project developers, where developers amend the code based on the initial report. Ideally, every bug, irrespective of its severity level, must be considered, but the developer should first prioritize resolving high and medium severity issues.
6. Final Report
Post code refactoring, auditors once again scan through the smart contract, reverifying for optimal code functionality.
How much does a Smart Contract Security Audit cost?
The auditing cost of a smart contract will depend on the number of smart contracts to be audited, the code complexity and the agreed scope of work. Note that just the creation of a smart contract alone can cost anywhere from 7,000 USD for a simple contract to 45,000 USD for a sophisticated one. Auditing this contract can cost an additional 5,000 to 30,000 USD.
For larger projects that demand focus on their development, the combined price for the creation and auditing of smart contracts could reach a minimum of 100,000 USD. Moreover, the implementation of smart contracts on the mainnet is not included in this pricing, which means that the final work price may be much more.
Why is Smart Contract Security Audit important?
Smart contracts might be prone to hacking that can result in irreparable loss. If auditing is disregarded, coding errors that exist on smart contracts can compromise personal crypto information of users. The list of cybersecurity attacks and vulnerabilities would never end unless we take preemptive measures by carrying out Smart Contract Security Audit in a timely manner.
Since smart contracts involve finances, it is necessary to make sure that they are totally error-free, otherwise, it would allow the hackers to take away the crypto assets that can’t be recovered at any cost. It is better to bear Smart contract audit costs than fall prey to cyber attackers.
Here are some of the benefits of a Smart Contract Security Audit:
- Improved protection against hackers
- Prevents costly smart contract code errors
- Safer decentralized finance products
- Increased trust in the project and the entire industry
- Higher credibility in an industry that is getting more competitive
The developers’ ability to do better, more enduring work, which results in safer products and applications, is made possible by this smart contract audit. Additionally, the audit report serves as a third-party expert’s stamp of approval for a new project, which investors and users can rely on.
Final Thoughts
As a primary component to the blockchain ecosystem, smart contracts should be flawless and do not show signs of vulnerability. Though expensive, Smart Contract Security Auditing should be considered as an investment by startup companies in the blockchain space as this method saves millions of dollars caused by smart contract exploitations, builds a strong reputation attracting more investors and users, and makes transaction process faster.
Even if you don’t have the technical knowledge, it helps a lot to take a look at the comments of the audit report and check the severity of potential issues. This should at least give you an easier time understanding its contents.
