Don’t Deploy Your Web 3.0 Product without a Smart Contract Audit

Many DeFi projects pop up in the online space these days. Frequently, their developers lack experience in the potential programming language issues, patterns, and other underwater stones of DeFi development. This lack of expertise gets reflected in the code’s quality and security. One critical error in DeFi can cost your company’s reputation and your users – all their money. Thus, smart contract audit services have risen in popularity as a means to avoid these unfortunate outcomes.

What Are Smart Contract Audits? How Can They Help Protect My Project from Failure?

Let’s start with the fact that audit has long been part and parcel of each successful project’s development process – a so-called sign of good manners in the blockchain world. An inside-out check of your code allows your users to ensure that your product is secure or detect its potential risks. Besides, you can attract investors with positive audit results, validating your product quality with an independent expert review.

Let’s take a closer look at the smart contract audit concept. 

First of all, the audit allows detecting your code’s weaknesses and potential vulnerabilities that can undermine the project’s operations and cause money losses or general system collapse. Besides, the audit presupposes spotting the code’s fragments that can lose functionality and correct method implementation in line with the project’s whitepaper. As a result of these errors, the smart contract’s functions can execute wrong actions, causing wrong code logic and product malfunctioning. 

Here is a simple example: the protocol’s administrator can change the smart contract’s critical parameters and can withdraw user funds from the system. 

This case may not be significant for people with a layperson’s understanding of code logic, but it opens doors for fraud. The smart contract audit can spot such issues, identify more intricate problems, highlight them, and make the findings publicly accessible in the network. 

Another vital aspect of the audit is code optimization. Sometimes, a cleaner and universal code may reduce the transaction cost. This is a widespread problem in the DeFi code, as many developers have joined the blockchain industry only recently and don’t know the tricks to save transaction gas fees. An audit can solve this bottleneck and make the code less gas-consuming.

How to Perform a Smart Contract Audit?

Requirement Gathering

An auditor collects data about your project and studies its whitepaper to clarify the project’s purpose and core functions it should perform.

Unit Testing

The project’s code logic is tested unit by unit to spot the weaknesses or critical vulnerabilities, single them out, and provide specific improvement recommendations.

Manual Auditing

After the automated code screening with automatic tools, an audit company proceeds to manual auditing of separate smart contract components and other pieces of the code.

Initial Reporting

A report on the audit results is compiled, with a well-organized account of all strong and weak sides identified in the audit process.

Code Refactoring

The code optimization effort is undertaken to remove the identified issues and vulnerabilities and improve product quality and functioning.

Final Report

The final report is made based on the code refactoring outcomes. The report should state whether refactoring ousted the identified code flaws or if further work is needed to improve the product’s safety and code logic.

Types of Smart Contracts

In what cases do you need to audit smart contract code? For which projects is the audit most relevant? To understand these nuances, let’s first look at the types of smart contracts currently used in the blockchain industry.

Decentralized Autonomous Organizations (DAOs)

Since DAOs are fully autonomous organizations with no central authority at their head. Thus, smart contracts rule everything in DAOs, setting the foundational rules, executing the decisions for which the majority voted, and completing the code’s internal audit.

Smart Legal Contracts

Smart contracts are increasingly used in law, as they contain all parties’ contractual obligations well-defined and sealed by all parties’ digital signatures. Thus, the smart contract self-executes as soon as one party’s obligation is fulfilled (and the blockchain receives data about this). The system works well and doesn’t require the use of costly lawyer services.

Distributed Applications

Smart contracts rule all operations in distributed applications (dApps), thus allowing users to enjoy a wide range of services without intermediary oversight. The smart contract functionality depends on the dApp’s specialization; it can be a banking app, a DeFi lending app, a personal finance management dApp, a healthcare advisor, a robo-trading solution, etc.

Contracts of Applied Logics (ALCs)

ALCs are the fundamental instruments of IoT ecosystems. They provide for the internal communication among devices included in the IoT network and operate automatically based on specific device data parameters. For instance, if the humidity detector sends data about high humidity, a smart contract self-deploys to instruct the air conditioning system to activate the humidity reduction regime; all is done without human interference. 

All these types require a careful review before you deploy smart contract for public use, as they involve p2p transactions and can cause severe losses in case of malfunctioning.

What Is Required From You for an Audit?

Crypto auditors will not require that much from you for a thorough check. First, you’ll need the code. Prepare the last version of your product’s code and try to bring it to order and test it. You also need to provide a detailed whitepaper of your project. It will help the auditors understand the expected outcome and compare it with what you currently have. The audit’s quality depends on these two components.

How to Choose an Auditor?

There are many smart contract audit providers in the market today. Unfortunately, most of these companies can’t deliver top-tier services as they are either fake or have little experience in this niche. Follow these simple rules to avoid dealing with such inexperienced or scam companies:

Choose Tried-and-Tested Companies 

Study the company inside out before hiring it. Look through the audits it already performed and research the audited companies to see whether any additional vulnerabilities were found after its audit. Find out how the company acted after such vulnerabilities were discovered.

Do Your Due Diligence

If you have failed to find detailed information about the company in step 1, contact the company of your choice directly. Ask its managers about the provider’s experience, talk to its auditors, and ask for the audit case studies directly from its staff. 

The More, the Better

To ensure the company is competent, you should double-check its audits with additional auditing efforts. This approach may help you find additional flaws and vulnerabilities in your product. Even if other auditors can’t spot anything new, these results will still be an advantage for you. Keep in mind that consensus forms the basis of blockchain operations. Thus, a consensus in several audits of your products will make your product look more reliable and stable compared to the competition. 

With the help of these simple steps, you can perform your product’s right audit.

Smart Contracts Use Cases

Smart contracts are universal instruments used in various blockchain-based projects in many industries. Here are a couple of informative use cases.

Financial Services

DeFi apps have taken the financial industry by storm, removing the need for third-party oversight (and commissions) out of the transaction process. Users can enjoy safe and transparent financial services and access a large pool of finance pools in the DeFi sector. 

Digital identity

Smart contracts allow people to stay private online while accessing a broad range of digital services. The user’s digital identity is transparent yet anonymized, allowing them to complete KYC and ensure compliance.

Business Management

Smart contract technology can help businesses save costs and time by automating many processes and improving asset management. You can create smart contract items for invoicing, inventory tracking, p2p transactions with counterparties, and other business operations. 

Healthcare sector

Smart contract use in healthcare is on the rise, as it helps avoid insurance claim duplication and fraud, ensures secure patient data storage and transfer, as well as universal and safe patient data access across the network of verified healthcare providers. 

Real Estate sector

Smart contracts help reduce the dealer fees for real estate transactions and offer a transparent, informative way of recording real estate objects’ history of ownership transfer, maintenance, reconstruction, and market prices. Besides, real estate tokenization helps people buy fractions of real estate, thus making this industry affordable to retail investors. 

Supply chain management

The application of smart contracts in supply chain management optimizes the entire supply chain and makes product origination tracking easier. End-users can trace their purchased items back to the manufacturer and observe their movement, ensuring the merchandise’s authenticity and quality. 

Gaming

NFT P2E games are a buzzword in the modern blockchain world. Smart contracts help users buy and sell in-game assets, spend the internal cryptocurrency, and move their assets across blockchains for safe trading or storage. 

Digital Marketplace

Blockchain-based marketplaces have emerged in all spheres, including crypto exchanges, NFT marketplaces, platforms with collectibles, and even carbon credits. Smart contracts make all operations on such marketplaces safe and transparent for participants. 

Corporate governance

The emergence of DAOs (decentralized autonomous organizations) has revolutionized the sphere of governance. DAOs implement automated mechanisms of governance to give all system participants voting rights to ensure their meaningful contribution to the entity’s functioning. 

Crowdfunding

Crowdfunding is not new, but the absence of fund allocation transparency stained the practice’s reputation. Smart contracts have changed this situation by writing down all transactions and further fund use in the blockchain’s public ledger. This crowdfunding organization raises investor trust and gives the public access to the invested project’s expenditures. 

Thus, smart contracts are everywhere. They fuel every blockchain-powered project and ensure that everything works automatically and correctly. It’s vital to subject them to a smart contract vulnerability scanner and audit smart contracts inside out to ensure safe and stable use.

Conclusion

As you can see from this article, auditing smart contracts is part and parcel of the modern blockchain world. They are a vital indicator of a trustworthy, successful digital product. A smart contract audit is vital for users and potential investors as it helps you show that your code is safe for use. Due to a thorough code review, the project’s developers can spot its flaws and avoid these mistakes in further project work. However, it’s important to find a reliable, trusted smart contract audit company for your security audit. 

Keep in mind that an audit is not a security guarantee, as it provides a 360-degree view of your code’s safety for a limited period only. However, checking the product’s code and paying some extra for a security audit is a much safer decision than saving on the smart audit cost and risking your company’s reputation or user money.