A smart contract is a computer program that is hosted and executed on a blockchain network. In a smart contract, there is a code specifying predetermined conditions that trigger a specific outcome when met. Smart contracts allow multiple parties to come to a shared result quickly, accurately, and in a tamper-proof manner using a blockchain instead of a centralized server.
As a form of automation, smart contracts offer a robust infrastructure since a central administrator cannot control them. They are also not prone to single points of attack by malicious entities. In a smart contract application, multi-party digital agreements can be made more efficient and transparent while reducing counterparty risk, increasing efficiency, and lowering costs.
Security Beyond Smart Contracts
The blockchain is secured by massive amounts of hash power exceeding the combined power of the world’s top supercomputers. However, while blockchains such as Bitcoin and Ethereum are secure, the applications running on the blockchain may not be.
These apps interact with the blockchain through smart agreements, but bugs in the code can result in security susceptibilities similar to other software.
Unlike most other kinds of software, blockchain applications often directly manage economic assets. Bugs can lead to significant quantities of money lost. A security audit of the smart contracts is needed to look for bugs and vulnerabilities to see if blockchain applications are safe.
How a Smart Contract Audit Works
A smart contract audit works the same way as a regular code audit. It involves a thorough investigation of the code for flaws before releasing it to the public. Smart contracts are self-executing, so it is critical to find any vulnerabilities before the launch of the code. Here is a breakdown of the steps involved in smart contract auditing:
- Agreeing on a specification: the specification documentation gives details of the project’s design, architecture, and build process.
- Running tests: this is where the actual testing to detect bugs takes place.
- Running automated symbolic execution tools: these tools analyze a program to determine the inputs that cause each part of a program to execute.
- Manual analysis of the code: automated tools are not as efficient when it comes to pinpointing vulnerabilities. As a result, a manual inspection is carried out to look into the rest of the potential vulnerabilities.
- Creating a report: the auditing team, at this point, gives out a report of their findings. From the results, the team can then work on integrating the recommendations into the project.