Introduction
We express our gratitude to the SKALE team for the collaborative engagement that enabled the execution of this Smart Contract Security Assessment.
SKALE is ERC777-based fungible token contracts (SkaleToken and SkaleTokenL2) with role-based access control and integration points for Optimism L2 bridging and on-chain staking/delegation systems.
Document | |
|---|---|
| Name | Smart Contract Code Review and Security Analysis Report for SKALE |
| Audited By | Seher Saylik, David Camps |
| Approved By | Ivan Bondar |
| Website | https://www.skale.space/→ |
| Changelog | 19/01/2025 - Preliminary Report |
| 27/01/2025 - Final Report | |
| Platform | Base |
| Language | Solidity |
| Tags | ERC777, Layer 2, Fungible Token |
| Methodology | https://docs.hacken.io/methodologies/smart-contracts→ |
Document
- Name
- Smart Contract Code Review and Security Analysis Report for SKALE
- Audited By
- Seher Saylik, David Camps
- Approved By
- Ivan Bondar
- Website
- https://www.skale.space/→
- Changelog
- 19/01/2025 - Preliminary Report
- 27/01/2025 - Final Report
- Platform
- Base
- Language
- Solidity
- Tags
- ERC777, Layer 2, Fungible Token
Review Scope | |
|---|---|
| Repository | https://github.com/skalenetwork/skale-manager/blob/develop/contracts/l2/SkaleTokenL2.sol→ |
| Commit | bed9af784ddeb99cc05c023d2b13b6729c9f3a06 |
| Retest | 88acab0ceaff046892810af5a336819191cc2348 |
Review Scope
- Commit
- bed9af784ddeb99cc05c023d2b13b6729c9f3a06
- Retest
- 88acab0ceaff046892810af5a336819191cc2348
Audit Summary
The system users should acknowledge all the risks summed up in the risks section of the report
{Finding_Table?columns=title,severity,status&setting.filter.type=Vulnerability}
Documentation quality
Functional requirements are partially missed.
Technical description is provided.
Code quality
The code implements confusing naming.
The development environment is configured.
Test coverage
Code coverage of the project is 39.5% (branch coverage).
Extensive tests were provided for the SkaleToken contract; however, no tests were supplied for the ERC777 and SkaleTokenL2 contracts.
System Overview
SKALE is an ERC777-based token system with the following contracts:
SkaleToken — primary SKALE Network token implementing ERC777 (with ERC20 backwards compatibility). It integrates with external locker contracts to enforce token locks during delegation/staking.
It has the following attributes:
Name: SKALE
Symbol: SKL
Decimals: 18
Max supply: 7,000,000,000 tokens.
SkaleTokenL2 — L2-compatible version of SkaleToken designed for Optimism. It allows the Optimism bridge to mint and burn tokens during cross-chain transfers.
ERC777 — a modified OpenZeppelin ERC777 implementation providing the core token functionality.
Permissions — an upgradeable access control base contract.
Privileged roles
DEFAULT_ADMIN_ROLE — Deployer/owner with full administrative control; can grant and revoke all roles.
MINTER_ROLE — Authorized to mint tokens up to the cap. Granted to SkaleManager (L1) or the Optimism bridge (L2).
Default Operators — Can transfer tokens on behalf of any holder unless individually revoked via revokeOperator().
Potential Risks
The contracts in scope (SkaleToken, SkaleTokenL2, ERC777, Permissions) make critical external calls to out-of-scope contracts including ContractManager, TokenState, DelegationController, Locker and Punisher, whose security was not verified as part of this audit. Vulnerabilities, misconfigurations, or malicious behavior in these external dependencies could compromise the security of the in-scope contracts regardless of the findings in this report.
Every token transfer depends on a chain of external calls (ContractManager → TokenState → DelegationController → Punisher), and if any contract in this chain reverts or becomes unavailable, all token transfers will be blocked.
Default operators set at deployment have the ability to transfer tokens on behalf of any holder without explicit approval. Users must actively call revokeOperator() to opt out. If a default operator address is compromised, it could move tokens from any user who has not explicitly revoked it.
Findings
Code ― | Title | Status | Severity | |
|---|---|---|---|---|
| F-2026-1479 | Floating Pragma | accepted | Observation | |
| F-2026-1478 | Redundant SafeMath Usage in Solidity 0.8.0+ Contracts | accepted | Observation | |
| F-2026-1478 | Incorrect ERC721 Naming and NatSpec Documentation in Fungible Token Contracts | accepted | Observation |
Appendix 1. Definitions
Severities
When auditing smart contracts, Hacken is using a risk-based approach that considers Likelihood, Impact, Exploitability and Complexity metrics to evaluate findings and score severities.
Reference on how risk scoring is done is available through the repository in our Github organization:
Severity | Description |
|---|---|
Critical | Critical vulnerabilities are usually straightforward to exploit and can lead to the loss of user funds or contract state manipulation. |
High | High vulnerabilities are usually harder to exploit, requiring specific conditions, or have a more limited scope, but can still lead to the loss of user funds or contract state manipulation. |
Medium | Medium vulnerabilities are usually limited to state manipulations and, in most cases, cannot lead to asset loss. Contradictions and requirements violations. Major deviations from best practices are also in this category. |
Low | Major deviations from best practices or major Gas inefficiency. These issues will not have a significant impact on code execution. |
Severity
- Critical
Description
- Critical vulnerabilities are usually straightforward to exploit and can lead to the loss of user funds or contract state manipulation.
Severity
- High
Description
- High vulnerabilities are usually harder to exploit, requiring specific conditions, or have a more limited scope, but can still lead to the loss of user funds or contract state manipulation.
Severity
- Medium
Description
- Medium vulnerabilities are usually limited to state manipulations and, in most cases, cannot lead to asset loss. Contradictions and requirements violations. Major deviations from best practices are also in this category.
Severity
- Low
Description
- Major deviations from best practices or major Gas inefficiency. These issues will not have a significant impact on code execution.
Potential Risks
The "Potential Risks" section identifies issues that are not direct security vulnerabilities but could still affect the project’s performance, reliability, or user trust. These risks arise from design choices, architectural decisions, or operational practices that, while not immediately exploitable, may lead to problems under certain conditions. Additionally, potential risks can impact the quality of the audit itself, as they may involve external factors or components beyond the scope of the audit, leading to incomplete assessments or oversight of key areas. This section aims to provide a broader perspective on factors that could affect the project's long-term security, functionality, and the comprehensiveness of the audit findings.
Appendix 2. Scope
The scope of the project includes the following smart contracts from the provided repository:
Scope Details | |
|---|---|
| Repository | https://github.com/skalenetwork/skale-manager/blob/develop/contracts/l2/SkaleTokenL2.sol→ |
| Commit | bed9af784ddeb99cc05c023d2b13b6729c9f3a06 |
| Retest | 88acab0ceaff046892810af5a336819191cc2348 |
| Whitepaper | https://github.com/skalenetwork/skale-manager/tree/develop/docs→ |
| Requirements | N/A |
| Technical Requirements | https://github.com/skalenetwork/skale-manager/tree/develop/docs→ |
Scope Details
- Commit
- bed9af784ddeb99cc05c023d2b13b6729c9f3a06
- Retest
- 88acab0ceaff046892810af5a336819191cc2348
- Requirements
- N/A
- Technical Requirements
- https://github.com/skalenetwork/skale-manager/tree/develop/docs→
Assets in Scope
Appendix 3. Additional Valuables
Additional Recommendations
The smart contracts in the scope of this audit could benefit from the introduction of automatic emergency actions for critical activities, such as unauthorized operations like ownership changes or proxy upgrades, as well as unexpected fund manipulations, including large withdrawals or minting events. Adding such mechanisms would enable the protocol to react automatically to unusual activity, ensuring that the contract remains secure and functions as intended.
To improve functionality, these emergency actions could be designed to trigger under specific conditions, such as:
Detecting changes to ownership or critical permissions.
Monitoring large or unexpected transactions and minting events.
Pausing operations when irregularities are identified.
These enhancements would provide an added layer of security, making the contract more robust and better equipped to handle unexpected situations while maintaining smooth operations.
Frameworks and Methodologies
This security assessment was conducted in alignment with recognised penetration testing standards, methodologies and guidelines, including the NIST SP 800-115 – Technical Guide to Information Security Testing and Assessment →, and the Penetration Testing Execution Standard (PTES) →, These assets provide a structured foundation for planning, executing, and documenting technical evaluations such as vulnerability assessments, exploitation activities, and security code reviews. Hacken’s internal penetration testing methodology extends these principles to Web2 and Web3 environments to ensure consistency, repeatability, and verifiable outcomes.