Understanding the Smart Contract Security Audits
par LCX Team · August 8, 2022
As the crypto industry is moving forward to decentralization, new terms are surfacing every now and then. If you are keeping up with those terms, you must have heard of smart contracts. These are the key elements of all the DeFi projects. Now, the security audits of these smart contracts are used to provide a detailed analysis of these contracts.
These security audits have become quite common in the decentralized space. It is known to have an impact on investment decisions when deciding on a DeFi project.Audits are extremely important for the purpose of cybersecurity.
What Is A Smart Contract Security Audit?
A smart contract security audit examines and comments on the smart contract code of a project. These contracts are typically written in the Solidity programming language and distributed via GitHub. Security audits are especially important for DeFi projects that expect to handle millions of dollars in blockchain transactions or a large number of players.
How Does It Work?
The audits are conducted in a four-step process:
The audit team receives smart contracts for preliminary analysis. The audit team presents its findings to the project for action. Based on the issues discovered, the project team makes changes. The audit team sends out their final report, which includes any new changes or errors that still need to be fixed.
Smart contract audits are critical for many cryptocurrency users when investing in new DeFi projects. It has become a prerequisite for projects that want to be taken seriously. Some audit providers are also seen as leaders in their field, which makes investors value their audits even more.
Need Of Smart Contracts:
With large amounts of value transacted or locked in smart contracts, they become attractive targets for malicious hacker attacks. Minor coding mistakes can result in large sums of money being stolen. For example, the DAO hack on the Ethereum blockchain stole approximately $60 million in ETH and even caused a hard fork in the Ethereum network.
Because blockchain transactions are irreversible, ensuring the security of a project’s code is critical. Because blockchain technology is very secure and makes it hard to get money back and fix problems after the fact, it is best to avoid vulnerabilities at all costs.
Methods Of Smart Contract Security Audits:
Gas efficiencies: Smart contract audits are not limited to blockchain security. They consider efficiency and optimization as well. Some contracts require a complex series of transactions to carry out their intended function. With gas fees on networks like Ethereum being relatively high, efficient contracts can save a significant amount of money on transaction costs. Increasing their performance is also an indication of the developer’s ability. Inefficient steps increase the number of failure points and should be avoided. When gas prices are high, smart contracts may fail to execute, which is exacerbated when a low gas limit is used. Contract vulnerabilities: The majority of audit work entails checking contracts for security flaws. While some issues are obvious, many exploits involve sophisticated techniques and strategies to drain funds. For example, market manipulation combined with weak smart contracts can be used to launch flash loan attacks. Auditors start the process of break testing by simulating bad attacks on the smart contract in order to find these problems.
Audit Report
The audit report is delivered at the conclusion of the audit process. Projects are expected to share their findings with the community in order to maintain transparency. Most reports categorize issues based on their severity, such as critical, major, minor, and so on. The status of the issue will also be listed in the report, as projects are given time to resolve issues before the final report is released.
A standard report will include recommendations, examples of redundant code, and a full breakdown of where coding errors exist, in addition to an executive summary. Before the final version is released, the project is given time to act on the report’s findings.
Where Can You Get A Smart Contract Audit?
There are different smart contract audit services available, such as:
CertiK: CertiK is the industry leader in smart contract audits. Hundreds of projects have used them to audit their smart contracts. In LCX, all our assets are audited by CertiK including our Diamond-NFT: TIAMOND, TIA token linked to it and LCX Token. QuantstampFairyproof
Conclusion:
Smart contract audits, fortunately for investors and users, have become the gold standard. When every project has one, however, it is no longer an easy indicator of value. This is why it is critical to read the audit yourself. Even if you don’t know much about how things work, it’s a good idea to look at the comments and how serious potential problems are.
When you come across an audit, you should now have a better understanding of its contents. As always, make sure that any investment decision considers the big picture and all available information.
