For dApps, blockchain initiatives, and the larger DeFi ecosystem to be trusted, smart contracts and their linked contracts must be audited.
Summary
The expenses of contract writing and any future court involvement brought on by ambiguities in contracts, according to proponents of smart contracts, might be significantly reduced. However, it's feasible that any quantifiable cost savings would be outweighed by the hazards involved with a badly designed smart contract. Having your smart contracts verified is one approach to perhaps reduce risks that might arise from depending solely on smart contracts.
What Is a Smart Contract Audit?
Numerous businesses have started up in response to the growing popularity of smart contracts with the intention of acting as smart contract auditors. Blockchain engineers that claim to understand how to deal with the technology are most frequently used as smart contract auditors.
Smart contract auditors frequently do an examination after receiving the final code of a smart contract; much like a developer could for any code or piece of software. This procedure often entails writing papers that describe the smart contract's architecture, looking for problems, manually examining the code, and testing the smart contract to make sure it works as intended.
Both vulnerabilities that are specific to blockchain software and those that are common to all software, such as a vulnerability to Denial-of-Service (DoS) attacks, may be detected through audits. Gas limit concerns are one issue that may come up with smart contracts written on Ethereum. You must spend "gas," which is a price levied to utilise the platform, in order to transact on the Ethereum blockchain, which serves as the foundation for many smart contracts. Too high or too low gas limitations might cause problems or hold up the execution of smart contracts. On Ethereum, smart contracts often have higher gas restrictions than do straightforward transactions. An audit might determine whether a smart contract's established gas limit would lead to problems in the future.
The business or service you choose for your smart contract security audit should be credible. Automated tools may be sufficient to ensure that your smart contract is correctly coded for simple smart contracts. A competent auditor may be able to identify rare or concealed weaknesses for more complex smart contracts. They could also be able to offer you a comprehensive report that identifies those vulnerabilities in detail and offers practical advice on how to remedy them.
What Is a Smart Contract “Hack?”
Generally speaking, software can be compromised when a malevolent party has access to the source code and either modifies the program or inserts harmful code. Transactions that are hashed, or added to a blockchain, are often immune to hacking attempts that insert bad code or completely alter the code. However, there is a chance that a hacker may find vulnerabilities in badly programmed smart contracts and subsequently carry out the contract in a way that the parties were not planning on if smart contracts are not properly created and inspected.
The 2016 DAO Hack served as the most notable illustration of this flaw. The DAO operated as a decentralised investment fund that made investments in blockchain-related businesses. As investment money poured in, engineers were aware that The DAO's underlying smart contract had flaws. A hacker then used the smart contract's flaw to create a smart contract that interacted with The DAO and obtained the deposited funds.
Despite the fact that the smart contract performed exactly as intended, this incident will always be remembered as a "hack" in the Ethereum and Bitcoin communities. The hacker just discovered a weakness that allowed them to interact with The DAO in accordance with how its smart contract was created, without altering the source code or installing malware.
Since some Ethereum stakeholders chose to go back to an earlier version of the blockchain in order to retrieve the stolen funds, the DAO Hack forced Ethereum to split, It is why Ethereum (ETH) and Ethereum Classic exist today (ETC).
This experience demonstrated the importance of testing smart contracts, especially when significant amounts of money are at stake, to the survival of blockchain initiatives that employ this automated technology. Even while smart contracts are unchangeable once they are put to the blockchain, if they are not properly created and audited from the beginning, they may still be attacked by hackers. Any smart contract must undergo a thorough audit to guarantee its long-term sustainability.
