Most blockchain projects incorporate smart contracts. Smart contracts are programs that run on top of the blockchain, providing them with a decentralized runtime environment. This makes it possible to do things with a smart contract that aren’t possible with traditional computer systems.
Many blockchain-related projects, such as DeFi projects or new tokens, are built using smart contracts running on a platform like Ethereum or Binance Smart Chain.
The power of smart contracts makes them popular, but it also makes them dangerous. Smart contracts are common targets of cybercriminals, making security audits an essential component of the smart contract deployment process.
However, for many DeFi projects, this necessary first step is not taken. A “test in prod” mentality leaves these contracts and their users at risk of exploitation.
A smart contract is a Turing-complete program, which means that any program that can be written on a traditional computer can be written as a smart contract. Additionally, smart contracts are run on the blockchain, which creates unique security challenges.
If you’re developing a blockchain project, here are 5 reasons why you need a smart contract audit:
1. Prevent Hacks of Stored Value
Smart contracts are capable of storing value in their accounts, and many finance-related smart contracts (like DeFi platforms) contain massive amounts of value. As demonstrated by numerous recent hacks, exploitation of vulnerabilities in these contracts can lead to massive losses for the platform and its users.
2. Prevent Public Access
One of the major selling points of many blockchains is that they can be used by anyone, and this applies to the smart contracts running on top of them as well. With anyone able to access the contracts and run their public-facing functions, exploitation of any vulnerabilities that the contracts contain is relatively easy.
3. Protect Code Vulnerabilities
Smart contracts are added to the blockchain as transactions, which are publicly visible to any member of the blockchain network. This means that code can be reverse engineered to search for vulnerabilities – assuming that the source code is not open-source.
4. Smart Contract Attacks Are Immutable
Most blockchain platforms implement immutable digital ledgers, and the operations of smart contracts are recorded on these ledgers. This means that any attacks against a smart contract are likely irreversible.
The immutability of the distributed ledger applies to the code of the smart contract as well. If update mechanisms are not built into the code, it can be impossible to correct any vulnerabilities that are discovered within a contract.
5. Protect From Front-Running Attacks
All transactions on the blockchain are publicly visible, meaning that they are potentially vulnerable to front-running attacks. This means that attempts to exploit a vulnerability before an attacker does could backfire and result in an expensive hack.
These are only some of the reasons why smart contracts can be so vulnerable to attack and why attacks against them have such a huge impact.
Smart contract audits are essential to the security of blockchain projects because they provide the opportunity for vulnerabilities to be identified and remediated before code moves to production and is vulnerable to exploitation.
Going Beyond the Smart Contract Audit
Smart contract audits are a necessary first step for the security of blockchain projects. However the “test in production” mentality that is so common in the DeFi space means that even this simple first step is not taken by many blockchain projects. As a result, major smart contracts are hacked on a weekly basis, resulting in millions of dollars in losses.
Incorporating smart contract audits into the development process is necessary but not sufficient for blockchain security. Smart contracts are only one aspect of the blockchain ecosystem, and too great a focus on smart contract code can leave a project blind to the other threats that it faces.
Click here to learn more about why smart contract audits (though important) are not enough to secure your blockchain project. And get in touch with Halborn at halborn@protonmail.com to find out how we can keep your blockchain company safe from attacks.