What is a smart contract?
Smart contracts are the innovation that brought blockchain technology to the place it is at the moment. It fulfills the agreement between the parties, without the need of intermediaries, resulting in a secure blockchain network.
Unfortunately, smart contracts have their downsides and could lead to major losses if hackers somehow find their flaws. Here are some popular smart contract attack that led to huge losses:
KuCoin exchange - $280 million loss in 2020
Harvest Finance lost $20 million
Ronin Bridge lost $600 million
Of course, those are only a few examples from the long, long list. Truth is, hackers are able to make big damages when they find a vulnerability in a smart contract. Fortunately, it is possible to avoid such major loss with a smart contract audit.
What is a smart contract audit?
A smart contract audit is a testing process for ensuring the viability of the smart contract code of a project.
Usually, the development team works on code for a protocol. Afterwards, a third-party auditor comes along to determine its feasibility. Next, the developers make all the necessary changes to the cose. This process repeats until the smart contract auditor confirms the code is 100% secure and bug-free. The last step of the process is when the audit team releases a report, providing the project with an industry standard of verified security.
How does it work?
Smart contract auditors make a manual audit. Of course, there are some companies who prefer auto-auditing tools.
Besides the different approach every company has, smart contract auditing usually follows the same steps:
The development team provides the auditor with all characteristics and specifications of the project. These details are required to help the auditors determine the purpose of the audit.
After determining the terms of the audit, the auditor runs tests on the smart contract code. The tests differ depending on the code’s main purpose.
Afterwards, the auditing team provides an audit report to the development team, with the found errors and bugs. They also provide feedback and potential solutions.
The developers repair the code, using the report.
The audit continues until the code is free of errors.
Benefits
Today, huge companies invest money, time and resources in the creation of smart contracts and of course they can not afford the risk of failing.
A vulnerable smart contract is more than just bad code and an unfortunate attempt at programming. It can affect the reputation of the development team and is able to destroy the project that took so much time and resources to launch. That is why smart contract audit has become an important stage of the development of any project. Other benefits of the smart contract audit include:
Protection against hackers;
Avoiding code flaws;
Launching safer decentralized finance products;
Trust for the industry;
Higher credibility;
Moreover, the smart contract audit is an expert review of the project. Thanks to it, developers are able to create more sustainable work and safer applications. This is the perfect method to guarantee the project stability and safety.