A Simple Guide on Smart Contracts: What is a Smart Contract Security Audit?
Smart contracts are self-executing computer programs that run on blockchain networks and automate the verification and execution of transactions. They have become a critical component of decentralized applications (dApps) and are widely used to manage digital assets, track supply chains, and perform various functions.
However, the immutable nature of smart contracts means that once they are deployed, they cannot be changed. This makes them vulnerable to security risks and demands a comprehensive evaluation of their code and underlying architecture to ensure their security, reliability, and compliance with intended purposes when deployed on the blockchain network. This evaluation is known as a “Smart Contract Security Audit.”
This article will be the last article of the “Smart contract” series. Check out the links below to read up on previous materials.
- A Simple Guide on Smart Contracts: Definition, How They Work, Pros and Cons
- A Simple Guide on Smart Contracts: Various Applications in Different Industries
- A Simple Guide on Smart Contracts: Top Smart Contract Blockchains in 2023
Definition of Smart Contract Security Audit
A smart contract security audit is an evaluation of the code and underlying architecture of a smart contract to ensure that it is secure, reliable, and meets the intended purpose, as well as identify any potential vulnerabilities or weaknesses that could be exploited by hackers.
The audit typically involves reviewing the code line by line to ensure it meets industry standards and best practices for security, as well as testing it against known attack vectors to ensure there are no exploitable flaws. A smart contract security audit is performed by experienced security experts who use a combination of manual and automated tools to detect and resolve vulnerabilities in the smart contract.
The goal of a smart contract security audit is to ensure that the code functions as intended and does not contain any exploitable flaws or vulnerabilities. A successful audit should provide assurance that the code has been written correctly and securely, and will not be vulnerable to attacks.
Why are Smart Contract Security Audits Important
Smart contracts are becoming increasingly popular due to their ability to automate processes on the blockchain; they automate the process of verifying and executing transactions without the need for intermediaries. Smart contracts however are susceptible to attacks from malicious actors who may seek to exploit any weaknesses in their code. A smart contract security audit helps protect against these attacks by identifying any potential flaws in the code before it is deployed on the blockchain network.
A security breach in a smart contract can lead to significant financial losses, as well as damage to an organization’s reputation. For example, in 2016, a vulnerability in the decentralized autonomous organization (DAO) smart contract led to a loss of $60 million worth of Ether. The incident highlighted the importance of smart contract security and the need for security audits.
A smart contract security audit helps ensure that a smart contract is secure, reliable, and meets its intended purpose. The audit process identifies and mitigates security risks and vulnerabilities, such as coding errors, design flaws, and malicious attacks. In addition, a successful audit can help ensure compliance with applicable laws and regulatory standards, as well as assure that all parties involved in a transaction have agreed upon its terms and conditions. This helps create trust between all parties involved in a transaction, which can lead to increased adoption of blockchain technology overall.
How to Conduct a Smart Contract Security Audit
Conducting a smart contract security audit is a complex and technical process that requires a high level of expertise and experience in both coding and cybersecurity principles. It typically involves the following steps which outline the basic process of conducting a smart contract security audit:
- Examining each line of smart contract code for flaws, inconsistencies, vulnerabilities, or security threats.
- Testing for known attack vectors, as well as ensuring compliance with applicable laws and regulations.
- Performing static and dynamic analyses, which entail examining source code and smart contract activity without running it to identify any code flaws or security vulnerabilities.
- Conducting penetration tests, which involve skilled security specialists simulating an attack on the smart contract using a combination of manual and automated tools to detect and resolve security vulnerabilities.
- Creating a report that highlights the audit findings, including a full analysis of the smart contract’s security risks, weaknesses, and mitigation recommendations.
Top Smart Contract Auditing Firms in 2023
As the use of smart contracts continues to grow, the demand for security audits is also increasing. Several companies specialize in smart contract security audits and provide comprehensive security assessments for blockchain-based applications.
Factors to Consider When Choosing a Smart Contract Audit Firm
Choosing the right smart contract audit firm can be a challenging task, as there are many companies offering security evaluations for blockchain-based applications. Here are some factors to consider when choosing a smart contract audit firm:
- Audit firm expertise and experience in blockchain technology, smart contract architecture, and common security vulnerabilities.
- Stellar reputation in the crypto market and a proven track record of providing comprehensive security assessments for blockchain-based apps.
- Capability to mix manual and automated security evaluation tools, while adhering to the best practices in security evaluation, such as Open Web Application Security Project (OWASP) standards.
- Competitive costs that do not compromise service quality, as well as a realistic shorter turnaround time that aligns with the project’s roadmap.
- Available support during and post-audit to address follow-up inquiries, and provide remediation assistance.
Additionally, some firms may offer automated tools or services which can help streamline this process even further.
Many firms are offering professional services related to smart contract audits; however, some stand out above others due to their experience and expertise in this field. We have curated some of the top smart contract auditing firms in 2023:
Hacken is a forefront cybersecurity firm that specializes in smart contract security audits. They have a team of experienced security experts who have a deep understanding of blockchain technology and its security vulnerabilities. Hacken offers a suite of quality services in the areas of smart contract code reviews, security assessments, penetration testing, and incident response. Their competitive edge is their use of cutting-edge tools and techniques to ensure that clients receive the highest quality security audit services.
The company has successfully worked on more than 700 projects with popular clients such as Avalanche and FTX. Hacken also supports multiple blockchains, including Ethereum, Solana, Avalanche, and Polygon, as well as other EVM chains.
ConsenSys Diligence is a subsidiary of ConsenSys, a leading blockchain technology company. They offer a wide range of security audit services for smart contracts, including code reviews, security assessments, penetration testing, and threat modeling. ConsenSys Diligence is known for its innovative approach to smart contract security, as well as the development of new dApps on Ethereum. Noteworthy qualities that set this firm apart from the bunch are its deep expertise in blockchain technology and its ability to deliver high-quality security audits in a timely and cost-effective manner.
With their robust staff of experienced auditors, coupled with proficient use of security analysis tools, ConsenSys Diligence has audited more than 100 projects, including notable names like Uniswap, 0x, Balancer, and Aave.
CertiK is an industry leader in blockchain and smart contract security established by Yale and Columbia University professors. CertiK is a well-structured organization that conducts comprehensive smart contract audits with auditors and cybersecurity specialists who are well-versed in blockchain and smart contract frameworks and architecture. The company offers services such as security audits, bug bounties, on-chain analytics, KYC, penetration testing, and recommendations when vulnerabilities and security issues are identified.
CertiK is well-known for having many independent audit teams working on the same project, and they even double-check their results at the end of each audit to avoid errors. Furthermore, CertiK has over 3,700 clients and has worked on well-known projects such as Aave, Polygon, BNB Smart Chain, and Chiliz.
Quillhash Audits is a blockchain and smart contract security audit firm that provides smart contract security services to businesses in the blockchain industry. Their services include code reviews, security assessments, dApps penetration testing, and security consulting. Quillhash Audits’ secured projects currently sit at over 700 globally, including StackOS, Nord Finance, and Dfyn.
QuillAudits also introduced the WAGSI Grants program to support the web3 community and BUILders (blockchain developers) with project security activities when typical security solutions are outrageously costly. Each eligible project can receive up to $3,000 in credits redeemable for the audit of their project.
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