What is a Smart Contract Audit and how does it work?

With the increased applications of blockchain technology, concerns about its security and infrastructure are no longer comforting. The possibility for a cybercriminal to turn a vulnerability into easy money is also greater. We are witnessing mainly two forms of cryptocurrency attacks.

One of these is focused on the end user. The attack method employs social engineering techniques such as enticing a victim to send bitcoin to an attacker's wallet. The other sort of hack we see is more sophisticated and requires a deep understanding of blockchain smart contracts and associated components, such as side-chain, cross-chain, wallets, understanding of various protocols, and more.

Due to the rise in these blockchain attacks, smart contract audits are becoming a more serious concern for blockchain organizations. Smart contract audits assist blockchain developers in identifying and correcting security flaws before they are exploited in the wild. Let's take a closer look at them.

What is a smart contract audit?

A smart contract audit is a systematic examination and analysis of the code of a smart contract that interacts with the blockchain. The audit procedure for a smart contract focuses on the code used to verify the smart contract's terms and conditions. Smart contract developers might quickly uncover vulnerabilities and defects with the use of such an audit before the implementation of smart contracts.

It is critical to properly test the code before deploying the smart contract. As it becomes impossible to change the code after it has been written to the blockchain, Deploying smart contracts without sufficient audits may result in undesirable scenarios such as differences in the contract's expected performance. At the same time, insufficient audit methods may expose you to dangers such as personal data loss or data theft.

Audits examine the smart contracts in a project in depth. Typically, auditors will evaluate smart contract code, generate a report, and submit it to the project for use. A final report is then issued, documenting any unresolved problems as well as the work that has already been completed to remedy performance or security issues.

Why are smart contract audits important?

Smart contract audits solve the most critical issues related to smart contract security. These are necessary to protect funds invested through them. Since neglecting them while utilizing a blockchain network to generate smart contracts might result in astronomically large additional costs, concerns about inefficiency, security, and misconduct abound.

Because all blockchain transactions are irreversible, funds that are taken cannot be recovered. This irreversible nature makes corporations anxious about their deployment. Additionally, you run the danger of losing the entire contract and all associated assets owing to security weaknesses in smart contracts. Due to the following factors, smart contract auditing has become more significant over the past several years:

Audits help in recovering all the vulnerabilities and flaws in smart contracts. Smart contract audits are highly recommended because the majority of these contracts deal with money or other assets. Auditors double-check the smart contract and make suggestions for removing all vulnerabilities in the code.

How does a smart contract audit work?

The audit focuses on fixing design flaws, security flaws, and coding faults. Each smart contract auditor's approach will differ. Here are some of the finest practices for smart contract audits that you can discover in the optimal workflow.

Specification agreement: The first phase of the audit starts with a full specification of the project. This helps the audit team to understand the project's goals when writing and using the code. Then the auditors make an initial estimate, depending on the amount of work required.

Testing: Testing assists in lowering the number of bugs that can be readily eradicated. Another aspect of testing in smart contract audit costs is code coverage. Furthermore, tests aid in guaranteeing developers' agreement on the planned functionality and performance of a smart contract project. 

Analysis: In this stage,  automated analytical tools are used to find the flaws in smart contracts. The Auditing Team improves the smart contract project team based on their observations. 

Final Audit Report: The creation of an audit report is the final stage in smart contract auditing. After completing the testing and analysis processes, the auditors should provide a complete audit report. Most significantly, the audit and project teams should meet to discuss the report's findings. Along with the audit team's recommendations, the conversation might assist the project team to grasp the difficulties and smart contract risks.

Factors to consider in a smart contract audit

Smart Contracts just not require good coding but also the capacity to construct a logic that makes your contract economical. Even though this characteristic may frequently be overlooked while creating processes, determining how effectively your contract is optimized is one of the key goals of performing a smart contract audit.

Smart Contract gas analysis

The most challenging aspect of smart contract auditing is the reduction of gas fees within a protocol. As fee reduction is linked to the creation of more sophisticated smart contract logic since gas fees depend on and rise along with smart contract complexity. A contract will also not be profitable or could be too costly and difficult to implement if the gas fee is not optimized.

Optimizing their efficiency is another sign of a skillful developer. Unproductive actions increase the chances of failure and must be avoided. Smart contracts may not operate properly when gas prices are high, and this risk also increases if a low gas limit is applied.

Smart Contract performance validation

Validating the performance of smart contracts is an essential component of a proper security audit. Poorly optimized contracts will constantly experience delays and consume more gas, resulting in cost overruns. Problems with a contract's performance are frequently related to the code's quality. It mostly addresses various errors or improper ordering in the contract logic. A poorly optimized contract will frequently see contract functionalities that were originally specified in the specifications are working incorrectly.

Contract upgradeability is a key factor in why smart contracts should be evaluated for performance. Even while your contract functions perfectly right now, it doesn't guarantee that it will continue to function that way following an upgrade or the addition of a new feature. Because of this, doing a security audit after each upgrade or enhancement is essential.

Smart Contract vulnerability identification

The majority of an auditor's job consists of examining contracts for security flaws. While some problems may be obvious, financial exploitation may be carried out via weak smart contracts and market manipulation. Auditors begin the break-testing procedure and mimic malicious assaults on the smart contract in order to detect these problems.

Reentrancy attacks: They can occur when a function calls another untrusted contract out. Then, the fraudulent contract calls the original function recursively in an effort to drain cash.

Function visibility issues: In Solidity, the default visibility of a function is public. If a developer forgets to specify the visibility of a private function, anyone can access it. For instance, anybody can invoke the destruct method to instantly void the contract.

Overflow: When a smart contract performs a calculation but the result is larger than the available storage, this is known as an integer overflow or underflow (usually 18 decimal places). As a result, calculations may yield inaccurate results.

To Conclude...

It is obvious that a smart contract audit has the potential to be a productive tool for enhancing smart contracts' functioning. Many smart contract auditing organizations are securing the crypto ecosystem now that we realize the importance of the smart contract auditing process. Depending on the platform or tool you choose to employ, the price of the smart contract audit may change significantly.

The effectiveness of smart contract audits is also influenced by a variety of other factors, including communication between the project team and the audit team. To increase their ability to effectively use smart contracts, businesses should focus on recognizing the problems with smart contract audits.