What is smart contract verification?
Blockchain technology is one of the revolutionary inventions of our time. Its open source and highly secure features have enabled an explosion of DeFi applications and crypto projects. However, while the blockchain is nearly impenetrable, its applications are not.
Most blockchain-based protocols run on smart contracts , prone to vulnerabilities and code errors. A single hacker attack is enough to destroy the development of several months and the reputation of the project forever.
Fortunately, any project can prevent this catastrophe with an outsider. Smart contract audit . This article takes a closer look at the importance of performing a smart contract audit of your protocol.
What is a smart contract verification?
The heart of a blockchain-based protocol is a smart contract. For the application to run smoothly, this contract must be free of errors. A smart contract audit performs an in-depth analysis of the contract code. In this way, it helps developers to identify potential vulnerabilities or bugs before implementing a smart contract.
In general, projects must rely on external reviewers, who can audit the developers' work comprehensively and impartially. The good news is that new projects can rely on professional and smart contract review services to complete this task.
Pricing for Smart Contract Verification varies depending on the project or service you choose. However, its benefits outweigh the risk of implementing a flawed smart contract on the blockchain.
Why smart contract audits are important
Writing a smart contract on the blockchain without verifying it is very treacherous. First, once implemented, the code cannot be changed. And, if the code contains errors, your data is vulnerable to hacker attacks. This means that your application is subject to a high risk of data theft.
Today, the breaking of smart contracts in the cryptosphere is expected. Hackers are constantly on the lookout for technical code issues and human error. Once they find and exploit one, they can get away with millions of dollars in cryptocurrency and data.
Famous Smart Contract Hacks
An example of the importance of smart contracts is the theft of $3 million from the DeFi Protocol Cover in 2022. Then a hacker noticed that the protocol had an infinite mining vulnerability. Therefore, he invested a considerable sum before withdrawing his investment and profits. He repeated these steps multiple times to accumulate gains that the protocol couldn't sustain.
Fortunately, Cover's attacker turned out to be a White Hat hacker, who returned the funds. Finally, he intended to show the developers of the project that his smart contract was flawed. However, not all attacks have such a moving ending. Other famous and less fortunate cases include:
The list goes on and on and can be expanded to include almost any project that implements an unverified smart contract.
In blockchain history, 2020 will continue to be one of the busiest years for hacking attacks on smart contracts. This is because these events have led to the emergence of several experienced smart contract auditors. And, as practice shows, an increase in auditing and utilization services has reduced the efficiency of these attacks.
Today they are opting for a smart contract verification before the implementation is a must. However, this process must go through the lens of an external reviewer. This is because project developers may have difficulty considering solutions to vulnerabilities in their code. Also, an external audit increases user confidence more than an internal audit.
How a smart contract verification works?
The risk of hacking is enough of a motivation for any project to opt for external smart contract auditing. However, security is not the only reason for this. Developers must also consider how beneficial it is for users to use their apps.
Creating and implementing a smart contract for beginning developers may seem easy at first. However, one of the main challenges they will face in the near future is gas optimization . This refers to the fee that users must pay to use a smart contract. For example, if the contract is poorly optimized, users will have to pay large sums, which exceed potential earnings. As a result, they may abandon the project entirely.
Control is a complex process, but it can help solve and prevent these problems. Is that how it works!
Phase 1: Project developers and reviewers agree on the scope of work
The controlled party provides the auditor with all the necessary information about the project and its smart contract code.
Phase 2: The reviewer collects the code design templates
The auditor inspects the code and reviews the architecture to ensure optimal integration of third-party smart contracts.
Step 3: Extensive testing
The auditor verifies all the functions of the smart contract. Experts test all possible use cases and known exploits that can attack the deal in this process .
Step 4 – Manual analysis
Reviewers extensively inspect the smart contract and code line by line. In this way, they detect possible risks and vulnerabilities.
Step 5 – Initial report
Reviewers produce an initial report of their findings and suggest all vulnerabilities.
Step 6: Bug Fixes
The auditors suggest solutions for any errors or errors that they presented in the initial report.
Step 7: Final verification report
The auditors verify the dependability of the smart contract after addressing all potential risks. Also, they issue a successful smart contract audit certificate. This document serves the project to demonstrate its reliability and trustworthiness to users and investors.
It is worth noting that this is the general process of a smart contract audit. However, the standards and procedures may differ depending on the auditor or the tool you choose to use. Furthermore, this sector is still developing. Therefore, it can change according to technological advances and market needs.