Smart contracts are the backbone of blockchain technology. They’re what allow people to do business with each other without a middleman. They’re also what makes it possible for digital tokens like Bitcoin or Ether to exist. But there’s one thing you might not know about smart contracts, they need a smart contract security audit!
Security audits are an important part of any software development lifecycle. However, they go doubly so for smart contract developers. Their code is immutable once it goes live on the Ethereum blockchain. Without an audit, a hacker could theoretically find a way to take over your token by exploiting some sort of bug in your smart contract that someone missed during testing! That would bad news for everyone involved, especially if you’re trying to sell them!
What is Smart Contract Security Audit?
A smart contract audit is a review of the code for smart contracts before it goes live on the Ethereum blockchain. It lets developers find bugs in smart contract code before it’s too late.
Smart Contract Security Issues
There are some smart contract security issues that might be overlooked during smart contract development. Unfortunately, these can allow attackers to change smart contracts’ logic or data on the blockchain itself. Some of them are:
1) Reentrancy Attack
A reentrancy attack is a smart contract hacking technique that involves calling smart contracts multiple times before the first execution has finished. It can be exploited to drain smart funds or even to take over other user accounts. This is why it’s crucial for smart contract developers to write their code in a way that prevents reentrant callbacks from executing again.
2) Timestamping Dependency
Timestamping smart contracts on the blockchain are important. This is because it allows developers to determine which contract was executed first. However, this dependency might lead to unexpected results if there are multiple smart contracts that depend on each other’s timestamps. Unfortunately, smart contract developers can’t be 100% sure that smart contracts will execute in the order they are supposed to. You can read about common blockchain security issues, here
3) Transaction-Ordering Dependence (TOD)
Transaction-ordering dependence or TOD can happen when smart contracts rely on a transaction order for their execution. If smart contracts wait for another contract’s completion before they start executing themselves, then different transactions’ orders could result in bugs. This is why smart contract developers need to make sure their code isn’t affected by transaction order and instead uses a reliable method of determining whether or not previous actions have been completed successfully.
4) Compiler Backdoor Vulnerability
Smart contract backdoors are smart contracts that allow an attacker to perform operations on the blockchain without any restrictions.
The smart contract compiler backdoor vulnerability allows attackers to add malicious code in smart contracts compiled by a compromised or hacked compiler, then secretly deploy it before anyone realizes what’s happening. This can give hackers full control over your smart contract and its associated funds!
How To Conduct Smart Contract Security Audit
1. Penetration Testing
Conducting regular penetration tests is your best bet against smart contract security issues. It helps you identify all the vulnerabilities on the smart contract. It also exploits them and reports the severity of the damage they can cause. This information will help you prioritize which vulnerabilities to fix.
2. Manual Analysis of Code
A smart contract developer should go through the smart contracts carefully and look for possible vulnerabilities. It includes looking at all functions, conditions that can cause problems while executing a function, loops in smart contact logic that might not terminate properly causing a reentrancy attack, etc. Make sure to test for all the vulnerabilities in the SWC Registry.
3. Fix Vulnerabilities
After penetration testing and manual analysis of code, you have to start the remediation process. You can hire security experts to do this or use an in-house team.
4. Bug Bounty Program
A bug bounty program rewards individuals for reporting bugs on websites, software, and organizations. It can be a great way of identifying smart contract bugs and flaws. You can use a testnet like Kovan.
Who Performs Smart Contract Security Audit
Smart contract security audits are performed by manual coding. You also have automated tools like Oyente or Mythril which can be used instead of manual auditing.
If someone wanted to perform a smart contract security audit, they would need programming skills along with knowledge in cryptography and blockchain technology. These areas overlap quite heavily when it comes to securing smart contracts. The auditor also has to have a strong hand in programming, software engineering, and cybersecurity.
If you want to be in control of your business’s security, the best way is to perform a smart contract audit. It can help you identify potential vulnerabilities and take steps towards securing your business for the future. The process will likely seem daunting at first glance but with these tips, it should become easier.