What is a smart contract audit and why is it important?
A distinctive feature of smart contracts is their ability to self-execute based on the conditions specified in the contract code. This code is stored on the blockchain, making it accessible to all interested parties. The contract execution does not require a central authority or mechanisms for monitoring condition fulfilment. Blockchain technology enables these functions.
Smart contracts can harbour hidden vulnerabilities that compromise their proper functioning and can be exploited by attackers. These vulnerabilities can impact a project’s reputation and hinder its future development.
A smart contract audit entails a comprehensive analysis of the code, with the aim of identifying errors and vulnerabilities. Auditors employ a combination of automated and manual verification methods to gain a holistic understanding of the contract’s operations and pinpoint weaknesses, which are not uncommon.
The audit reports provided by auditors serve as a valuable source of detailed information about vulnerabilities. Based on this information, necessary corrections can be made to ensure the proper execution of the contract. This instils confidence in investors and all stakeholders, elevating the level of trust in the contract.
The auditing process typically involves four stages:
Initial analysis conducted by the auditor.
The project team receives a report detailing identified vulnerabilities along with recommendations for addressing them.
The team implements necessary changes based on the identified issues.
The auditor submits a subsequent report, incorporating the changes made.
Depending on the audit results, a security certificate may be issued. For large projects, undergoing an audit is a standard procedure, and reports from reputable international companies like Certik, Slowmist or H-X Technologies hold significant value for investors.
How to choose the right smart contract auditor?
One efficient method of selecting an audit company is to review their portfolio. A positive indicator is the successful development and practical application of some of their audited projects. The popularity of proven projects also enhances an audit company’s credibility. Protocols with substantial liquidity tend to attract hacker attention, making high-quality auditing essential for enhanced protection against attacks.
While most auditors specialise in auditing Ethereum contracts, only a few companies have experience auditing projects on platforms such as Solana, Polygon, Avalanche, Fantom, and BNB.
Another criterion for selection is the quality of audit reports. A comprehensive report should detail identified vulnerabilities and provide actionable steps to address them. Particular attention should be paid to code quality and adherence to business logic.
Experienced companies possess their own knowledge bases regarding smart contract exploits. They continually update their expertise and sometimes even offer knowledge-sharing opportunities.
While it is natural for smart contract auditors to occasionally make mistakes, consistent errors should raise concerns, warranting caution when considering such auditors. If mistakes have resulted in funds loss due to hacking incidents, alternative auditors should be sought.
Reports with minimal or no findings can also raise suspicion, as projects without vulnerabilities are exceedingly rare.
Auditing companies with a strong reputation typically charge higher fees for their services, but these expenses are justified. Clients pay for thorough and high-quality audits, detailed reports containing recommendations for improvement, and, in the best cases, a second check conducted by the auditors to issue a security certificate after addressing identified issues.
Conclusion
Smart contract auditing has become the standard practice for projects aiming to establish a high level of trust. A certificate from a reliable audit company attests to the security of a smart contract, enhancing its value in the eyes of investors. The cost of such an audit can range from several thousand to tens of thousands of dollars, depending on the contract’s size, complexity, and depth of the audit process.