Smart contract auditing has become a common practice in the Decentralized Finance (DeFi) market to protect blockchain investments and transactions. They’re a mandatory proactive measure employed by individuals and businesses to protect their crypto assets from malicious activities and human errors since blockchain transactions are irreversible.
In this post, we’ll share how to audit a smart contract properly by sharing the methods, tools, and standard processes.This way, you can make more informed decisions when deploying smart contracts on different blockchain networks.
What Is a Smart Contract Audit?
The definition that wikipedia gives us is the following: A smart contract is a computer program or a transaction protocol that is intended to automatically execute, control or document legally relevant events and actions according to the terms of a contract oran agreement. The objectives of smart contracts are the reduction of need for trusted intermediators, arbitrations costs, fraud losses, as well as the reduction of malicious and accidental exceptions
The Importance of a Smart Contract Security Audit
As crypto-assets and investments become more mainstream in the post-pandemic digital age, there’s been an unprecedented rise in malicious activities on the internet. Smart contracts have become a key target for hackers and cybercriminals as they carry vast amounts of value transacted on blockchain networks.
Even a tiny error in code can open vulnerability gaps for criminals to explore and steal your crypto assets. One of the biggest recent examples of this was the Ethereum DAO breach in 2016 that saw nearly the blockchain lose $60 million worth of Ether (Eth).
As a consequence, businesses are growing more concerned as threats become even more sophisticated every year. Thus, smart contract auditing has become a mandatory risk assessment process to:
▪ Identify and eliminate code errors in the development cycle.
▪ Improve quality assurance by getting experts to review and double-check the smart contract code.
▪ Remove vulnerabilities by writing or altering the code and preventing malicious attacks.
▪ Enable continuous security assessments for enhancement opportunities.
▪ Provide regular SOC 2 reports with vulnerability details for crypto regulations.
How to Audit a Smart Contract
A smart contract audit is typically performed by blockchain developers or auditors who check codes for known vulnerabilities and deploy different tools and methods that apply to each contract’s unique business logic. Here are the two main methods used to assess conformance and verify that a code is free of errors and vulnerabilities.
A manual smart contract auditing process entails a group of blockchain auditors manually assessing the code structure for duplication, encryption errors, and other overlooked or neglected details.This method is usually more time-intensive and expensive since it requires experienced in-house professionals or third-party services to go through every line of complex codes.
Automated smart contract auditing has become a smart alternative to manual auditing since it entails using bug and vulnerability detection software to find errors and gaps in the code. For example you can use SAFU Scanner one of the most powerful tool on the market.
This method is faster and more suitable for developers looking for an automated approach to risk assessment so they can focus on other core objectives.
An Overview of the Smart Contract Audit Process
Now that you understand the two main methods of smart contract auditing, let’s check out the standard procedure followed by most auditors in the DeFi space:
1. Code Design Evaluation
The first step of a smart contract audit involves gathering the contract’s code specifications. By thoroughly studying its architecture, auditors can understand the project’s scope before proceeding to run tests.
Next, auditors conduct scenario testing to test each smart contract function using manual or automated tools.
3. Approach Selection
Each auditing method (automated and manual) offers its benefits. For instance, smart contract scanners are faster and can remove the hassle of the auditing process.In contrast, manual methods are more thorough and typically carried out by experts that don’t rely on software.
Once the audit is complete, the final step is to draft a report comprising all the discoveries and feedback/suggestions to fix any issues.
So, there you have it – a quick guide to smart contract auditing for beginners. This process can save thousands or even millions of dollars worth of crypto assets from loss or theft due to errors and threats.