How to Perform a Blockchain Audit?

Planning to undertake a blockchain audit and wondering how important it is to get right? You have come to the right place.

In this article

1. Blockchain Audit: What, Why, and How
2. Wondering How to Go About a Blockchain Code Audit for Your Project?
3. Frequently Asked Questions on Blockchain Audit

Blockchain Audit: What, Why, and How

The importance of code if you want your blockchain application to shine cannot be understated. Manual traditional audit of code is important in blockchain development projects, and let’s now understand more about this.

1. What is a blockchain code audit?

Put simply, a blockchain audit is a structured and systematic code review of a blockchain development project, and it’s done manually. It might use static code analysis tools, however, the main thrust is on experienced blockchain developers to review the code to find bugs.

2. Why your project plan must include a blockchain code audit

As observations from experts show, Ethereum smart contracts have a 3% failure rate. This is indeed a challenge, however, smart contract bugs can be prevented.

Blockchain/crypto experts have noted that it’s eminently possible to detect smart contract bugs early and prevent them from reaching the production environment.

As a responsible entrepreneur or business leader planning to launch a blockchain project, you should include a blockchain code audit in your project plan. Read more about the observations of experts in “Blockchain smart contracts: more trouble than they are worth?”.

3. How to conduct a blockchain audit?

Let’s understand the steps involved in a blockchain audit, which are as follows:

3a. Locking down the source code

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When you undertake a smart contract audit, you first need to lock down the version of the source code. This ensures transparency in the audit process.

It also helps you to differentiate the version already audited vs any further changes you make to the code. You should document the version number, commit time-stamp, etc. for the version you are auditing.

3b. Understanding the blockchain project

You need to engage an external team for auditing your blockchain project. Such an external team needs to understand the project, its use case, its architecture, etc. You should plan for sufficient time for this in your project plan.

3c. Reviewing the project documentation

The external audit team you engage needs to review various documents like the business requirements, architectural decisions, technical design, etc. This team should also review the test cases and test plans thoroughly.

3d. Preliminary code review

A blockchain code audit team needs to review the code multiple times, and a preliminary code review is the first such instance. The entire audit team needs to read the complete source code repository.

During this exercise, they understand how the development team has implemented the design. Read more about this in “How to audit a smart contract?”.

3e. Static code analysis

The audit team could use available tools for static code analysis. As I have noted earlier, there is limited tooling support for this at this point since blockchain is still a new technology.

3f. Code quality analysis

An independent audit team reviews whether the development team has adhered to the coding best practices. This review focuses on the structure of the code, the naming conventions used for the variables, comments in the code, etc. The development team should avoid using replicated code, and the audit team checks for this too.

3g. Analyzing the presence of known vulnerabilities

The independent audit team should scan the code thoroughly to find whether there are known vulnerabilities. Examples of known vulnerabilities are as follows:

• Reentrancy;
• Shadowing of variables;
• Storage pointers that can be exploited;
• Overflows and under-flows;
• Bugs that could enable hackers to launch Denial-of-Service (DoS) attacks;
• Incorrect cryptographic signature validation;
• Generating random numbers in an insecure manner;
• Timestamp dependencies;
• Incorrect assumptions were made for ordering blockchain transactions.

This is not an exhaustive list of such vulnerabilities, and you can read the “Decentralized Application Security Project (or DASP)” for more insights.

3h. Functionality analysis

An independent blockchain code audit team should check whether the code in question will deliver the desired functionalities. They need to document all observations.

3i. Reporting and tracking

At the end of the review, the audit team should prepare a detailed report. You need to review this and work with your development team to address the issues, subsequently, you need to document the closure of the issues.

Addressing bugs in smart contracts and reviewing them again follow an iterative process. You need to ensure that all such iterations are fully documented.

Wondering How to Go About a Blockchain Code Audit for Your Project?

A blockchain code audit is essential for your blockchain project. As I have explained, your team must thoroughly test the smart contracts, however, that is not sufficient.

Testing of smart contracts is subject to the same limitations of software testing in general, such as it’s never possible to test a program completely.

Moreover, every software testing project contends with schedule and budget constraints, and it’s the same with testing smart contracts. You might not be able to test every path. Moreover, it’s not possible to test every valid or invalid input.

Given that there are a limited number of blockchain smart contract verification tools, you have a significant dependence on a structured code audit quality through internal and external auditors. It can be hard to find expert audit firms for such an extensive audit process though.

You should look for blockchain development experts with a deep understanding and expertise in blockchain code audit processes. Our guide “How to find the best software development company?” can help you find such an expert audit firm.

If you are still looking for experienced blockchain developers to help you audit blockchain applications, DevTeam.Space can help you. Write to us your initial blockchain audit requirements via this form and one of our competent managers will link you with the right blockchain code developers and auditors.

Frequently Asked Questions on Blockchain Audit