The DeFi world is gradually becoming the de facto standard for financial interactions. When compared to the traditional financial system, Decentralized Finance offers numerous benefits that give us the confidence to say that it will become the new face of finance. We will discuss the smart contracts in blockchain in this exclusive publication on the need for smart contracts audit.
In essence, DeFi is a financial system that is governed not by a third party but by a few lines of code. These lines of code define the rules and regulations required to enforce terms and conditions for a financial service. These lines of code are what we call a smart contract.
Therefore, it is needless to say that smart contracts are an integral part of the DeFi world. This leads to the deduction that DeFi is heavily dependent on smart contracts. If the smart contract is not working, DeFi as well will not work. When we say that a smart contract is not working, what it means is that due to some vulnerabilities, bugs, or poorly written code, the functionality defined in the smart contract is questionable.
In order to ensure that a smart contract is secured and optimized, smart contract audits come into the picture.
What is a Smart Contract Audit?
In smart contract audits, the auditing companies scrutinize the security of a smart contract and its code quality. Through this, the audit company is able to identify potential bugs, errors, or vulnerabilities in the contract. This in-depth analysis of smart contacts not only leads to smooth functioning and execution but also protects the application from huge potential losses in terms of finance, assets, or reputation.
Thus, it is very important to get the smart contracts audited before it is deployed because once the code is written to the blockchain, it cannot be amended. Security breaches may welcome numerous other issues too, like- the contract may not operate in the desired manner, or more severely it can even result in loss of data or money.
A point to consider here is that a smart contract audit is not just testing it against possible attacks but much more than that.
The key areas that should be kept in mind while conducting the smart contract audits are:
- A close check on the consistency of the code
- Focus on common errors, such compilation, reentrance mistakes, stack problems, variable types, and more
- Focus on the host’s platform-specific errors and security flaws
- Efforts towards simulating the attacks on the contract
The approach towards smart contract audit
Generally, smart contract audits are done using the following two approaches:
Manual Auditing involves a team of experts/auditors, who examine each and every line of code with the view to analyze it for compilation and reentrance mistakes that can further help in identifying the other overlooked security issues. This is how successful and long-term implementation of your smart contracts will become practically possible.
Manual Code analysis can be done using two approaches- conducting a check on the standard list of vulnerabilities or by conducting a free exploratory check on the basis of the developer’s own experience.
This approach is considered to be the most accurate and complex approach, as it results in the detection of hidden problems; such as problems in contract logic or in architecture, not only the mistakes in the code.
Automated Security Analysis follows a sophisticated penetration testing approach and helps in finding vulnerabilities in a much faster way. This approach is suitable for projects that require faster go-to-market time. Auditors use various bug detection softwares under this approach. These softwares help in finding the exact place responsible for each input execution and also indicates where the possible bug can occur.
However, these softwares come with their own drawbacks. The fact that they are extremely fast, they can sometimes miss vulnerabilities, or identify any piece of code as a mistake when it is not. This can result in many serious concerns, which is why manual code analysis or manual auditing approach is highly recommended.
Why do smart contracts in blockchain needs audit?
The need for a smart contract audit can not be stressed enough. The unbelievable traction of the DeFi world has resulted in attracting the interest of people with malicious intentions. This is why we have seen a ridiculous increase in DeFi hacks over the past few months and these attacks are expected to increase in number in the future too.
Considering the role played by smart contracts in the DeFi ecosystem, their audit needs to be of the top priority.
The main aim of getting the audit of the smart contracts is to detect and eliminate smart contract vulnerabilities and also to keep a check on the reliability of the contract’s interactions, thus ensuring a seamless DeFi application.
We need smart contracts audit-
- To identify bugs before they lead to losses
- To enhance smart contract’s performance
- For code optimization resulting in lesser transaction fee
- For contract’s performance validation
- To fulfill regulatory or compliance requirements
- To provide credibility and instill trust among the people
The list is long and it’s unquestionable why we need smart contract audits.
Is the smart contract audit enough?
The question that naturally comes to mind is how can we ensure that the contract or project we are engaging in is free from vulnerabilities or is a secure project?
The simple answer is, you can never know.
There is no such approach till now that can concretely say that the project is secure or free from all errors and vulnerabilities. The closest we can get to gain such confidence is to have a detailed ‘audit report’.
Thus, the task of an audit is to conduct a deep analysis of the smart contract using various approaches to check the formal logic, identify all potential risks or threats or security issues, and inform clients about these, along with several other critical functionalities. The audit also helps in generating a streamlined product and further aids in winning the confidence of clients, building the reliability of your smart contract.
Today, Smart contract audit has become a vital part of a DeFi project. Is your smart contract audited is not the only question. The main question is, is your smart contract audited with the best practices and expertise?
Reach out to QuillHash
With an industry presence of years, QuillHash has delivered enterprise solutions across the globe. QuillHash with a team of experts is a leading blockchain development company providing various industry solutions including DeFi enterprise, If you need any assistance in the DeFi project development, feel free to reach out to our experts here!
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Source: https://blog.quillhash.com/2021/03/17/the-need-for-smart-contracts-audit-smart-contracts-in-blockchain/
