Why Are Security Audits So Important?

What Are Smart Contract Audits, And How Do They Work?

Over the years, the crypto market has seen tremendous growth. And if you ignore the minor market crashes, you can consider it to be in a constant state of bull run. It has helped people achieve the financial freedom they have always dreamed of. But as is the case with any technology, the crypto space is not free from its flaws.

In the world of DeFi, hacking, scams, and bugs in smart contracts are not uncommon. As a new and experimental technology, such issues can arise, but with the rising number of DeFi ecosystem attacks, DeFi projects have been taking steps to improve security and Dapp protection through various tools and services. 

Among these, the term “smart contract audit” has gained popularity. So, what exactly is a smart contract audit and how does it work? Let’s explore together to understand its importance and role in ensuring the security of DeFi protocols.

A Brief Overview of An Audit

An audit is a crucial security-focused review of code to discover vulnerabilities, bugs, and potential future failures in DeFi protocols. Despite its significance, an audit cannot guarantee complete safety of the smart contract but is a best effort approach to uncover security issues. 

Recently, Harmony’s bridge was attacked, leading to a loss of funds. This highlights the importance of conducting smart contract audits and taking measures to prevent such incidents.

However, with the blockchain ecosystem being relatively new, unaddressed architectural issues may emerge, leading to security breaches that are not related to coding. Auditors may also overlook some vulnerabilities, making it vital for DeFi projects to undergo several independent third-party audits to ensure maximum effectiveness in protecting against attacks. Therefore, smart contract audits are an essential aspect of building a secure and trustworthy DeFi ecosystem.

Smart contract audits should be an ongoing process, not a one-time event. This is because as the code changes, new vulnerabilities and bugs may arise, which could expose DeFi protocols to attacks. 

Therefore, DeFi projects should aim to conduct regular audits throughout the project’s life cycle. To identify and mitigate any security flaws. By doing so, they can keep up with the ever-evolving threat landscape and provide users with the highest possible level of security. In summary, investing in smart contract audits is a crucial step in building a secure and trustworthy DeFi ecosystem.

How Does A Smart Contract Audit Work?

When conducting a smart contract audit, auditors will review the smart contract’s code to discover any vulnerabilities, bugs, and potential future failures. They will then produce a detailed report on the findings, outlining any errors or security issues that need to be addressed.

Next, they will work with the project team to resolve these issues and ensure that the smart contract is as secure and functional as possible. The final report will detail any outstanding errors and the work already done to address performance or security issues. However, note that the steps for smart contract development and audit may vary depending on the industry and project requirements.

In addition to smart contract audits, it is also essential to prioritize security during the smart contract development phase. This means following best practices, such as using secure coding standards, conducting code reviews, and implementing a secure development lifecycle. By taking these measures, DeFi projects can reduce the likelihood of security breaches and minimize the damage caused by any attacks. Overall, it is crucial to consider security at every stage of the smart contract lifecycle to ensure a robust and secure DeFi ecosystem.

Executing Tests

To ensure the efficiency of smart contracts, auditors must conduct various tests to identify any potential vulnerabilities or bugs. These tests, conducted in a preliminary round, involve running the smart contract through a series of checks. If the smart contract fails any of the tests, it is sent back to the developers for revision.

The next step involves unit tests, which are conducted by the developers to test the functionality of the smart contract. These tests identify problems with the smart contract’s functionality that must be addressed before being passed on to auditors for security analysis. At Novvr, we strongly recommend a test coverage of at least 95% to ensure a thorough analysis of the smart contract’s functionality and security. This approach helps to minimize potential risks associated with smart contract development.

Understanding Business Logic

The next step in auditing a smart contract is understanding business logic. For this, the auditors need to get in touch with the developers and project managers. Understanding business logic is key to conducting an audit, as the auditors will know the “whys and hows” of different functions in the code.

Automated Analysis

To ensure the highest level of safety, smart contracts are passed through several security analysis tools. These tools are designed to detect vulnerabilities, identify bugs, and ensure that the smart contract is performing optimally. Some of the most popular security analysis tools include slither, mythril, manticore, and echidna. 

Additionally, MythX is a widely used security auditing API that can be used to detect vulnerabilities in smart contracts. With the rapid development of smart contracts, it is essential to utilize the right security analysis tools to ensure that the contract is secure and performs optimally.

The Importance of An Audit

Smart contract security is becoming increasingly important with the growth of DeFi. Exploits can happen at any time, as hackers are always looking for vulnerabilities to exploit. That’s why it’s important to have a third-party security audit for your smart contract. At Novvr, we specialize in smart contract development and security auditing. Our team of experienced auditors and developers will help you identify any security issues and help you create a more secure smart contract. With our help, you can avoid becoming a victim of an exploit and keep your funds safe.

Here’s what a lack of an audit has done to some famous defi projects.

As we have emphasized time and time again, flawless code alone is not enough to secure your smart contracts. Even the smallest bugs can be exploited in multiple ways, including through price manipulation and bad sequence of operations. Unfortunately, the cryptocurrency space is highly fragmented, with constant in-fighting between different protocols. This makes it difficult for projects to recover and rebuild trust with their users if they have been hacked before. Whether you are a DeFi business owner or a retail investor, smart contract security should always be at the forefront of your mind when making decisions.

For Retail Investors

To navigate the risky DeFi space, individuals looking to invest in projects or tokens must exercise caution. With thousands of projects launching, only a small percentage actually succeed, and new protocols are especially susceptible to attacks. 

Therefore, before investing in any protocol, it’s critical to conduct a thorough background check on the project. Smart contracts are usually publicly available, and if they’re not, it’s a red flag and a clear indication to steer clear.

For DeFi Business Owners

To ensure the safety and success of your business in the DeFi space, it’s crucial to protect it from potential hackers who aim to make quick profits. Your business is always at risk, but taking the necessary steps to protect it is paramount. One of the best ways to protect your project is by getting your code audited by multiple agencies over time.

At Novvr, we provide top-notch smart contract auditing services to help mitigate potential risks. Our multi-layered auditing process ensures the highest level of security for your project, giving you peace of mind and allowing you to focus on growing your business.

For Developers

When building an app or project on an existing DeFi project, it is crucial to be extra vigilant. While your code may be flawless, a single architecture flaw can cause the entire system to collapse. To ensure that the architecture you are working on is secure, you can either conduct an audit yourself or seek the help of an external agency. 

It is always a good practice to have multiple parties review the architecture to ensure that it is free from vulnerabilities. With the increasing number of hacks and exploits in the DeFi space, taking the necessary precautions is key to the success of your project.

Closing Thoughts

As the DeFi space continues to evolve, cybersecurity has become a critical issue. The industry has learned from its mistakes, and audits have become an essential part of the development process. 

Whether you are a regular user, developer, or business owner, smart contract audits are critical to ensuring security at all levels. To stay updated on the latest developments in web3 security, follow our blog for insightful information and expert advice.

Contact Novvr for Smart Contract Audit

Start your smart contract audit with Novvr today and get the peace of mind you need to confidently launch your Dapps.

To prepare your smart contract for an audit, there are several key steps you need to follow. 

  1. Read specs/docs
  2. Run Tests
  3. Automated Analysis
  4. Manual Review
  5. Prepare Report

Here are a few points that you must follow to get your smart contract ready for an audit.

  1. Add Comments to your code
  2. Document your functions
  3. Tests (must), if your tests don’t pass, don’t go for an audit
  4. Transparent Communication
  5. Ready to share your time with Auditors

Missing any of these points can leave your code vulnerable, and unready for an audit. Get your Dapps secured and tested at Novvr today. 

Know More about the smart contract audit process.

Novvr is a Blockchain Development company based in India, has helped over 150+ brands in 80+ countries. We are committed to quality and unparalleled customer service in all aspects of the business. 

© 2024 Novvr Technologies. All Rights Reserved