Introduction
Before we dive into the top 5 best practices, it’s worthwhile to review some basics. Smart contracts are programmable computer codes that execute functions or transactions on blockchain platforms. By creating a digital contract between two parties, users can employ smart contracts to perform tasks with greater efficiency and without third-party interference.
While smart contracts have many advantages in terms of speed and cost-effectiveness, there are also challenges associated with them when it comes to security. Smart contract security is one of the first-order concerns for these platforms because of their potential impact if exploited by malicious actors. A specific example would be Ethereum’s DAO event from 2016 where an attacker drained $55 million from investors using this method (the term “Dumpster Fire” was coined after this incident). That kind of financial loss doesn’t just hurt investors—it hurts entire companies as well as their communities!
What is a smart contract?
A smart contract is a business logic coded into a virtual machine. Smart contracts are visible to everyone, immutable, and cannot be changed once deployed. They are executed on the blockchain network. Smart contracts are autonomous, self-executing contracts that can facilitate the exchange of money, content, property, and/or anything of value when certain conditions are met.
Why do you need a smart contract audit?
When writing code, developers are tasked with a lot of responsibilities. They have to ensure that their code is written correctly and securely, so it can be used without any issues—but they also need to ensure that the key functionality works as expected, the code is easy to understand and extend, and much more. This can lead some developers to overlook security vulnerabilities in their applications.
Smart Contract Security Audits help reduce this risk by providing clarity on where these vulnerabilities may be, as well as how best you should address them. These audits do not guarantee that your application will be bug-free but they will provide clear guidance on how you can mitigate potential risks by identifying potential issues early on during development (and hopefully before they turn into real problems).
Is it possible to run a smart contract security audit in-house?
It is possible to run a smart contract security audit in-house, but it’s not recommended. Asking your existing developers to do it will take up valuable time and resources that could be better spent on other things. Additionally, if your company does not have blockchain experts or experience with the technology, then you’ll need to hire one or more—and even then it may not be enough.
A good way of determining whether or not you can perform an audit internally is by analyzing the amount of time needed for each phase of the process:
- Defining scope (1–3 days)
- Analyzing code (1–2 weeks)
- Identifying vulnerabilities (1 week)
What does a smart contract security audit cost?
Smart contract audit costs can be divided into several components. The first component is the actual cost of auditing a smart contract. This is usually calculated based on the size of the codebase and/or the number of contracts. For example, if you have a small smart contract with just a few lines of code, then it will take less time to audit than if you have a large complex one with many functions and variables.
A second component that adds to your smart contract audit costs is related to its level of complexity. Some types of audits may require more time than others due to lack or abundance of documentation (if any), use cases understanding, etc. An example would be an instance where there are no automated tests available at all but only manual ones; this situation will increase costs because there must be performed manual testing instead which takes longer due to its nature (manual).
Is there a way to reduce the costs of a smart contract security audit?
Yes, there are ways to reduce the costs of a smart contract security audit.
- Reduce the size of the codebase to audit. Ideally, your smart contract security auditor should be able to review your entire project, but if there’s no way around this, you can use an experienced smart contract security auditor that specializes in reviewing smaller projects (like ours!). Our team has audited many successful ICOs and knows how to efficiently review even large codebases with multiple languages and frameworks. We’ve also performed formal audits on more than 50 cryptocurrency exchanges and other blockchain companies.
- Use an experienced smart contract security auditor. Choose someone with experience auditing similar projects before so they know what they’re looking for when examining each line of code in your system—and make sure they have references! You’ll find most reputable companies are happy to share their previous work as well as past clients’ reviews or ratings online. This can help you narrow down who would be best suited for your project based on cost structure, turnaround times, and reputation within their industry (or industry peers).
- Make sure the smart contract security auditor has a reputation for delivering on time and within budget…and quality! If they don’t deliver what they promise they won’t get any repeat work from us so we tend not to recommend going anywhere else once we’ve found someone reliable enough who isn’t too expensive either.”
Do you need to audit the entire blockchain codebase?
Unless you’re an experienced smart contract developer, there’s a good chance that you won’t be checking the entire codebase for bugs. You’ll probably be relying on tools like GitHub or Etherscan to find out if there are any vulnerabilities in your smart contract.
However, it’s important to note that this isn’t a foolproof method of finding bugs in your smart contracts. Many developers have reported finding bugs that were missed by these popular tools and repositories. This is why it’s still important to hire an audit team or company to go through your contracts thoroughly before deploying them onto Mainnet or Testnet!
When should you run your first smart contract security audit?
It is important to run a smart contract security audit before you launch your smart contract, add new features and functionality to existing smart contracts, deploy the code on the mainnet or in testnets, or make any changes to existing code. The early detection of bugs prevents them from being exploited by malicious actors.
Before you launch your first smart contract:
- Ensure that there are no vulnerabilities concerning its design and implementation. Conduct a manual audit of the source code if possible. If not possible, use an automated tool such as Solidity-Flawfinder or Snyk’s [Snyk] Python lib for static analysis.
Which companies provide transparent, open-source blockchain codebases and have run smart contract security audits?
To evaluate a smart contract security audit, you first need to know what the project is. This can be difficult because there are hundreds of blockchain projects and new ones are coming out every day.
Some open-source smart contract platforms have been around for a while that you can use as examples:
- Ethereum – The most popular platform for building smart contracts, and has been around since 2015.
- EOS – A newer platform (since 2017), but has gained popularity due to its ability to scale well enough to handle millions of transactions per second.
- Tezos – Another newer platform based on the Proof-of-Stake consensus mechanism which aims at being scalable and secure. Tezos’ mainnet was launched in September 2018 after raising $232 million through an ICO sale in July 2017; they raised more than any previous ICO before them! Since then it has experienced several challenges including governance disputes between developers who wanted different things from their shared investment funds… but remains one of today’s most talked-about projects among crypto enthusiasts around the world.”
