Smart Contracts - Fraction AI

1. Introduction

Fraction AI engaged Halborn to conduct a security assessment on their smart contracts beginning on April 15th, 2025 and ending on April 22nd, 2025. The security assessment was scoped to the smart contracts provided to Halborn. Commit hashes and further details can be found in the Scope section of this report.

The Fraction AI codebase in scope consists of a set of smart contracts that enables the creation, ownership, and competitive evaluation of AI agents through session-based competitions with on-chain reward distribution and verification.

2. Assessment Summary

Halborn was provided 4 days for the engagement and assigned 1 full-time security engineer to review the security of the smart contracts in scope. The engineer is a blockchain and smart contract security expert with advanced penetration testing and smart contract hacking skills, and deep knowledge of multiple blockchain protocols.

The purpose of the assessment is to:

• Identify potential security issues within the smart contracts.

• Ensure that smart contract functionality operates as intended.

In summary, Halborn identified some improvements to reduce the likelihood and impact of risks, which were partially addressed by the Fraction AI team. The main ones were the following:

• Include the intended user's address in the signed message hash to bind signatures to specific users.

• Include the chain ID in the signature message to make signatures chain-specific.

• Consider enforcing the use of safeTransferFrom() instead of transferFrom() to ensure that the contract recipients can handle the transfers correctly.

3. Test Approach and Methodology

Halborn performed a combination of manual review of the code and automated security testing to balance efficiency, timeliness, practicality, and accuracy in regard to the scope of this assessment. While manual testing is recommended to uncover flaws in logic, process, and implementation; automated testing techniques help enhance coverage of smart contracts and can quickly identify items that do not follow security best practices.

The following phases and associated tools were used throughout the term of the assessment:

• Research into architecture, purpose and use of the platform.

• Smart contract manual code review and walkthrough to identify any logic issue.

• Thorough assessment of safety and usage of critical Solidity variables and functions in scope that could led to arithmetic related vulnerabilities.

• Local testing with custom scripts (Foundry).

• Fork testing against main networks (Foundry).

• Static analysis of security for scoped contract, and imported functions (Slither).

4. Static Analysis Report

4.2 Output

The findings obtained as a result of the Slither scan were reviewed, and many were not included in the report because they were determined as false positives.