Smart contracts have become a game changer in the rapidly growing blockchain and decentralized finance (DeFi) industries. These contracts are self-executing, which means that the terms of the agreement are built directly into the code, in which simple procedures are included that eliminate the need for mediators. However, it is critical to ensure that smart contracts are safe and well-functioning. This is where smart contract auditing comes in. In this post, we’ll look at what these smart contract audits are, why they’re necessary, and how they’re done.
Before we discuss further the actual auditing process, it is important to understand what smart contracts are. Smart contracts are only executed when predetermined conditions are met accurately and are programmed on blockchain technology. They are used to automate the implementation of an agreement so that all parties are immediately aware of the outcome, without having the need for an intermediary, or without any delay. Some of the common use cases include the tokenization of securities, treasury management, supply chain logistics and legal agreements.
Even though smart contracts are powerful enough, they are also susceptible to vulnerabilities and errors. As they often handle significant amounts of financial transactions, there can be a significant financial loss if there are any minor/major errors in the code. Here are some reasons why smart contract audits are essential:
The audit process is methodical and thorough, there are usually a few important steps:
Before the auditors actually begins with the process, Audit engineers should try to understand the real purpose of the smart contract and how it will be used. The auditor should collaborate with the development team to find out what the purpose of the contract is and how it works.
The first technical step in the audit process is usually an automated analysis. Auditors use special tools (static and dynamic – such as Slither and Consensys MythX) to scan smart contracts. These tools can be used to detect the presence of inefficiencies/vulnerabilities and coding errors. Although automated technical analysis is only a preliminary step because it cannot detect all possible problems, but it is an important step that cannot be neglected.
Testing is an important and critical part of the audit process. Auditors run through a bunch of different tests that usually include unit tests, integration tests, and simulations using environments that look like the real world. This thorough and adept testing helps to figure out how the smart contract will behave in different situations to make sure it works well before it is finally implemented to avoid losses later.
Once the audit review is complete, the auditors’ next task is to immediately create a detailed report with a list of the defect(s) they see, the problem, recommendations, and changes. Measures need to be taken to solve these problems. It also shows where the smart contract runs without error(s), so we can get a balanced view between its security aspects. Let’s have a look at the overview of findings and critical issues:
– Detailed list of inefficiencies/issues, their impact and severity of problematic issues and suggested fixes/solutions that need to be done with the highest priority.
– Ranking the problems hierarchically and evaluating the severity of each problem, according to their intensity (such as severe, high, moderate, low).
– The best practices and suggesting the improvements required in the code quality is recommended.
In many areas, smart contracts must comply with regulations. Audits will ensure that the contract will fulfill its obligations and make sure that any problems and errors will be avoided before it’s actually implemented. It shows user(s) and investors that the contract is properly controlled and secure. Security will be an important factor in blockchain’s competitive environment.
The development team begins working to resolve the issues, once the audit is reported. This is critical because it makes the contract safe and prevents the chance of a risk occurring. After changes are made and bugs are fixed, the smart contract should again be thoroughly re-checked to make sure everything is working properly, all issues have been resolved, and no new problems have occurred.
Smart contract monitoring is an important part of the blockchain ecosystem. They allow us to use smart contracts with confidence because we know they are secure, efficient, and compliant with relevant regulations. The importance of thorough analysis and auditing is increasing, making it an essential part of the development process. If you plan to use smart contracts, it is recommended that you conduct a thorough audit with due diligence to help build trust, protect assets, and pave the way for success in blockchain technology.
