How to Audit a Smart Contract?

Interested in how to audit a smart contract? What is a Smart Contract Audit? And how much does it cost to get a smart contract audited?

In this article, I am going to explain what exactly smart contract audits include and answer the most popular and exciting questions about smart contract audits.

Let’s get started!

In this article

1. How to Do a Smart Contract Audit
2. Smart Contract Performance Validation
3. Smart Contract Optimization via Gas Analysis
4. Smart Contract Vulnerability Identification
5. How Much Does a Smart Contract Security Audit Process Cost?
6. Frequently Asked Questions on Smart Contract Audit

What is a Smart Contract?

A Smart Contract is a digital contract or agreement that is signed and stored on a blockchain network. Smart Contract is designed to automatically execute, control, or document actions following the terms of a contract or agreement.

One of the several issues with smart contract technology is the need to properly audit smart contracts to ensure that there are no security issues and that all contracts are fully performance-optimized.

What is a Smart Contract Audit?

A Smart Contract Audit is an examination and detailed analysis of the information and code developers use to create a smart contract.

Smart contract audit is especially important for decentralized apps as the blockchain technology they are built on is immutable. Over $5 billion has been lost to vulnerability breaches in DeFi to date.

If you have never audited a smart contract before, then the process can certainly be a real test for your development team. In this article, I intend to outline exactly what is involved in a smart contract audit.

How to Do a Smart Contract Audit

There are two fundamental approaches to smart contract auditing — Manual and Automatic code analysis. Let‘s take a look at exactly what each one involves:

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Manual vs. Automatic analysis of code

While there are a few prizes for guessing what manual analysis of code involves, there are several advantages to this approach.

• If you have a good-sized development team, conducting a manual analysis of the smart contract code is the best way of identifying coding problems.
• A manual review of code will involve the audit team examining each line of code to scrutinize it for compilation and re-entrance mistakes as well as security flaws.

Naturally, a particular focus should be paid to identifying security issues, as these are the biggest threats to the successful long-term implementation of your smart contract.

• Automatic code analysis has the benefit of saving software development teams massive amounts of time when checking their code.
• Such an audit, including automatic analysis of code, also allows for sophisticated penetration testing, which helps find vulnerabilities extremely quickly.

The majority of developers who create Ethereum smart contracts use Truffle to conduct automatic code testing. Alternatively, other developers use programs like Populus, a Python-based framework that allows for quick testing using TestRPC.

When relying on automated code testing programs, developers need to remember that they have several drawbacks.

The main problems that arise from automated code analysis include missed vulnerabilities and code being falsely identified as a problem when it isn‘t.

While false positives can be a nuisance, the real danger is in missed vulnerabilities. It is for this reason that developers should always conduct a thorough manual analysis of code using techniques like break testing, even if they have already conducted automated code testing.

Types of attacks for Ethereum smart contracts:

Some cybersecurity attacks that can affect an Ethereum smart contract include the following:

• Reentrancy attack;
• Over and underflows;
• Reordering attack;
• Replay attack;
• Short address attack.

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Smart Contract Performance Validation

It is vital to ensure that your smart contract is performance-optimized before rolling it out. The performance of any smart contract is directly linked to the quality of the code.

It is for this reason that all smart contract audits should include performance validation. Poorly optimized contracts will also cost more to execute, as I will explain later on.

Validation will include checking the code for any errors that might slow down or affect other aspects of the contract’s performance in some way.

The easiest place to start when conducting a performance review is performing formal verification to see if the contract executes in a way that fulfills all the agreements that both parties decided when entering the contract.

In the case of a supply chain-based smart contract, for example, this agreement could be something as simple as one party confirming the delivery of goods, which would then trigger the release of payment in the form of crypto tokens or a cryptocurrency such as ETH or Bitcoin, etc.

Checking that the defi (decentralized finance) contract is able to automatically initiate the payment after the delivery of goods is registered is the first step.

Next will be to test the contract for variables. Since there can be a wide range of contract “triggers” and resulting actions, the contract must be tested to ascertain that it can handle all the possible variations that might be asked of it.

Therefore, part of performance validation also includes pressure testing the smart contract for variables that might arise from how it is implemented in the real world.

Examples of this could be anything from a third party setting up the contract, changes in conditions of execution, changes to the completing action(s) of the contract after it is activated, and even how the contract reacts to disputes arising from one or both parties feeling that the terms of the contract have not been properly fulfilled.

Believe it or not but one of the most recurring performance-related problems results from developers not understanding the full scope of the contract.

A simple misunderstanding regarding the exact specifications of the contract will almost certainly lead to errors in its operation.

Testing for as many of these potential errors or oversights as possible before activating the smart contract will help reduce the instances where contracts act inappropriately or don’t provide all the desired outcomes.

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Smart Contract Optimization via Gas Analysis

In order to cover the costs of transacting smart contracts, platforms such as the Ethereum Project need to charge ’gas‘ in the form of Ether. Gas prices vary depending on the complexity of the smart contract design.

In this example, they vary according to the number of operation codes that the Ethereum Blockchain Virtual Machine has to execute. For a clearer picture of exactly how much your smart contract will cost to maintain, you can see a complete listing of Ethereum‘s prices here.

Before even getting near coding your smart contract, you should already have a good idea of the gas costs associated with your particular contract’s operation.

Using Ethereum’s Yellow Paper price chart, it is possible to build a fairly accurate estimate of your smart contract‘s gas costs.

Once you have this estimate then you can use this figure to see whether your smart contract needs optimizing.

By executing a single smart contract transaction and then comparing the gas costs you have been charged with your original estimate, you will be able to gain a clear view of just how optimized your contract actually is.

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Smart Contract Vulnerability Identification

There has probably never been a piece of software that didn‘t contain either bugs or some kind of vulnerability. Smart contracts are, unfortunately, no different.

According to an article in Bleeping Computer, a group of researchers created an analysis tool named Oyente and found 34,200 Vulnerable Ethereum Smart Contracts in 2016 alone.

The article points out that the team created the tool after a hacker found a vulnerability in a smart contract launched by The DAO organization.

This hacker was then able to steal a whopping $50 million from their ICO. This figure gives some idea of the enormity of the problem and highlights why conducting a thorough smart contract security audit is so essential.

Fortunately, the research team released the source code of Oyente back in 2016 on GitHub. Since it is open-source, it is free for any developer to download.

Though this tool is now largely out of date, and so has problems detecting more recent vulnerability threats, it is still a valuable tool that can help developers identify many blockchain security vulnerabilities.

Another group of researchers recently developed an even more advanced tool called Maian. This tool is particularly useful in searching for vulnerabilities in contracts that would allow hackers to steal funds from wallets.

Developers can also use the equally effective Mythril, a program by Consensys that has attempted to build on the work of both teams.

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How Much Does a Smart Contract Security Audit Process Cost?

Smart contract auditors charge between $5,000 and $15,000 on average or higher, depending on the complexity and size of the contract.

The exact smart contract audit cost really depends on a number of key factors.

Firstly, a huge factor is whether a company or a startup uses its in-house team or a specialist outsourced development team like DevTeam.Space.

While the costs associated with outsourcing smart contract security audits are higher, the chance of identifying security vulnerabilities is likely to be much better due to their level of expertise and ability to look at the blockchain project from new angles.

Thanks to a growing group of passionate smart code experts, it is now possible to submit your code for a comprehensive quality review and security audit report through sites such as Solidified.io.

Sites like these provide smart contract developers access to a pool of talented auditors who are experts in using automated tools and algorithms for blockchain technology.

They will analyze the code to see if it will execute according to its intended behavior and examine it through unit tests for vulnerabilities, Solidity construct usage, best practices, etc.

For this reason, it is certainly worth it for any company that is looking for the most cost-effective way to audit their smart contracts to consider this option.

The only drawback to this approach is that some blockchain application contracts might not interest the experts on these sites enough to audit them. Moreover, waiting times can also be high.

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Planning for a Smart Contract Audit?

While there are many ways to approach a smart contract audit, the final goal is always the same. Any audit should ensure that the code is bug-free and error-free.

Thanks to the development of more and more powerful tools to help automate smart contract auditing, the whole audit process is becoming easier day by day.

However, we are still some way off from developing a sophisticated enough smart contract ecosystem to replace good old-fashioned manual code reviews.

Most developers recognize the value of having their code audited by an entirely separate group of dapp experts.

Whether this is a dedicated development team or a group of impassioned smart contract programmers willing to audit your code for free, the benefits of multilayered code scrutiny cannot be overstated. Read more on blockchain audit in our blog.

If you are still looking to outsource expert blockchain developers to either create or audit your smart contract project, contact DevTeam.Space by filling out a quick form. One of our technical managers will get in touch with you soon to help you build the right smart contract project team.

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Frequently Asked Questions on Smart Contract Audit

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Related Smart Contract Articles

Learn more about smart contract development and audit from our expert articles:

1. How to Interview and Hire Blockchain Developers (scroll down to read the article)
2. What are smart contracts in blockchain networks?
3. What are 10 Smart Contracts Use Cases?
4. What is a Blockchain Smart Contract Audit?
5. How to Create a Blockchain Smart Contract for Enterprise
6. What are the 5 Best Smart Contract Platforms for 2024?
7. How to Choose Smart Contract Platforms?
8. How to use Smart Contracts for eSports App?
9. How to Set up Hyperledger Smart Contracts for Ethereum