How much does it cost to audit a smart contract? How to audit smart contracts?
Smart contract security audits are very common in the decentralized finance (DeFi) ecosystem. If you invest in a blockchain project, your decision may be based in part on the results of a smart contract code review.
While most people understand the importance of auditing to cybersecurity, not many get down to the lines of code. Let’s take a look at smart contract security auditing, specifically, how to audit smart contracts and the costs associated with them so that you can make more informed decisions when investing in your projects.
What is smart contract auditing?
Smart Contract Security Audit examines and comments on a project’s smart contract code. Typically, these contracts are written in the Solidity programming language and made available through GitHub. Security audits are especially valuable for DeFi projects that expect to handle blockchain transactions worth millions of dollars or a large number of participants. Audits typically follow four steps: 1. Provide the smart contract to the audit team for preliminary analysis. 2. The audit team presents their findings to the project for action. 3. The project team makes changes based on the problems discovered. 4. The review team will publish their final report, taking into account any new changes or unresolved bugs.
For many crypto users, smart contract audits are essential when investing in new DeFi projects. It has become the standard for projects that want to be taken seriously. Certain audit providers are also considered industry leaders, which makes their audits more valuable in the eyes of investors.
The Importance of Smart Contract Auditing
With large amounts of value transacted through or locked in smart contracts, they become attractive targets for malicious attacks by hackers. Slight coding errors can lead to huge amounts of money being stolen. For example, the DAO hack on the Ethereum blockchain took away approximately $60 million worth of ETH and even led to a hard fork of the Ethereum network.
Since blockchain transactions are irreversible, it is essential to ensure that the project's code is secure. The high level of security of blockchain technology makes it difficult to recover funds and resolve issues after the fact, so it is best to prevent breaches at all costs.
How does smart contract auditing work?
The process of smart contract auditing is fairly standard among audit providers. While each auditor's approach may be slightly different, a typical process is as follows: 1. Determine the scope of the audit. Smart contracts and project specifications are defined by the project (its intended purpose) and the overall architecture. Specifications help the audit team understand the goals of the project when writing and using code. 2. Provide an initial quote based on the amount of work required. 3. Run the test. Their exact nature will vary depending on the audit team, their analytical tools and their methodology. Typically, both manual and automated testing are performed. 4. Create a first draft of the report for discovered errors and provide it to the project team for feedback and subsequent fixes. 5. Issue a final report that considers any actions taken by the team to address the issues raised.
Smart Contract Audit Method
Gas Efficiency
Smart contract audit does not only focus on blockchain security. They also focus on efficiency and optimization. Some contracts perform a complex series of transactions to complete their intended function. Since gas fees in networks such as Ethereum are relatively expensive, efficient contracts can save a lot of transaction costs.
Optimizing its performance is also an indicator of developer skill. Inefficient steps provide more points of failure and should be avoided. Smart contracts may fail to execute when gas costs are high, especially when using low gas limits.
Contract Vulnerabilities
Much of the work in an audit involves checking contracts for security vulnerabilities. While some issues are easy to see, many exploits involve advanced techniques and tactics to drain funds. For example, market manipulation can be used with weak smart contracts to conduct flash loan attacks. To uncover these issues, auditors initiated a disruption testing process and simulated malicious attacks on smart contracts. Common vulnerabilities include: 1. Reentrancy issue: When a smart contract makes an external call to another external contract before resolving any impact. The external contract can then recursively call the original smart contract and interact with it in ways it shouldn't be able to because the original contract's balance has not yet been updated. 2. Integer overflow and underflow: When the smart contract performs arithmetic operations, but the output exceeds the storage capacity (usually 18 decimal places). This may result in incorrect amounts being calculated. 3. Preemptive opportunities: Poorly structured code can provide early warning of market purchases or sales. In turn, this can allow others to use this information and conduct transactions for their own benefit.
Platform Security Vulnerabilities
Most audits include looking at the network hosting the contract and even the APIs used to interact with DApps. A project could be vulnerable to a DDoS attack or have its website UI compromised, meaning users would actually connect their wallets to malicious blockchain applications.
What is an audit report?
The audit report is provided at the end of the audit process. In the interest of transparency, projects should share their findings with the community. Most reports classify problems by severity, such as critical, major, minor, etc. The report will also list the status of issues as the project has time to resolve them before the final report is released.
Along with an executive summary, a standard report will include recommendations, redundant code examples, and a complete breakdown of where coding errors exist. The project has time to act on the report's findings before the final version is released.
How to audit smart contracts?
Many smart contract auditing services are famous for their services. Two are particularly popular and obtaining an audit from them requires an initial quote and handover of information.
Safful
Safful is the industry leader in smart contract auditing. Hundreds of projects have audited their smart contracts with them. PancakeSwap, BSC’s largest automated market maker (AMM), is an example.
Additionally, the vast majority of projects supported by Binance Labs have reviewed their contracts with Safful. Safful publishes a leaderboard of audited projects that allows you to compare each project and its safety score. Please note that in addition to Ethereum, Safful also covers BSC and Polygon projects.
ConsenSys Diligence
is run by Ethereum co-founder Joseph Lubin, and ConsenSys is a big name in blockchain development in the cryptocurrency industry. Under ConsenSys Diligence, the company provides Ethereum smart contract auditing. They also provide automated services that check for common errors in Ethereum Virtual Machine (EVM) contracts.
How much does it cost to audit a smart contract?
The exact cost of an audit depends on the number of smart contracts to be inspected. Typically, an audit costs thousands of dollars. A particularly large project can easily cost more than $10,000. The audit firm that conducts the audit and its reputation can also affect the amount you pay.
Conclusion
Fortunately for investors and users, smart contract auditing has become the gold standard. However, when every project has one, it's no longer a simple indicator of value. That’s why it’s important to read the audit yourself. Even if you don't have technical knowledge, it can be helpful to review reviews and the severity of the potential problem.
When you do encounter an audit, you should now at least have an easier time understanding its content having completed this article on how to audit smart contracts. As always, make sure any investment decision looks at the big picture and takes into account all information.