Smart Contract Bug Bounties: Beginner’s Guide To Web3 Bug Hunting

Web3–the digital frontier we’re crafting–comes with unprecedented opportunities but also undeniable risks. Among these risks, the solidity and security of smart contracts stand out. 

pragma solidity >=0.8.2 <0.9.0;
contract Storage {
uint256 number;
function store(uint256 num) public {
number = num;
}
function retrieve() public view returns (uint256){
return number;
}

Even in this elementary Storage.sol contract, unnoticed vulnerabilities could result in unintended behaviors. While a smart contract audit is an indispensable solution before deployment, it has a limited time frame. Projects looking for 100% security need active defense, hence smart contract bug bounties.

Bug Bounty Defined

A bug bounty is a security initiative in which a company invites external cybersecurity researchers to identify and report bugs in its software or systems in exchange for monetary rewards.

Think of a bug bounty as a constant cycle of code review conducted by external security researchers. Dozens or even thousands of these white-hat hackers identify smart contract vulnerabilities before bad actors exploit them. Motivation – winning the race and claiming bounty rewards.

def bug_bounty_reward(bug_severity):
if bug_severity == "critical":
return "$100,000"
elif bug_severity == "low":
return "$1,000"
# ... so on

Much like the pseudo-code above, the severity of the detected issue often dictates the reward. It all depends on your skill, but also luck, as the project may be free of a critical security issue you’re hoping to spot.

Bug Bounties In Smart Contract Security

A bug bounty for smart contracts is not that different from a typical bug bounty for a web application. Basically, a smart contract is an application that runs on blockchain. Every application has vulnerabilities, and smart contracts are no exception. 

Smart contracts, autonomous, self-executing programs, are the backbone of many decentralized platforms. However, the very features that make them powerful—immutability and transparency—can also be their Achilles heel.

A flaw in a smart contract can lead to irreversible damage, both financially and in terms of trust, and the losses keep mounting up. DeFi lost a total of $6.9 billion over the years, a huge chuck due to smart contract exploits. On Aug 14, 2023, Zunami Protocol was hacked for $2.1 million due to a critical flaw in one of its functions that calculates the token price.

Code Autonomy And Security

Smart contracts, once deployed, operate without interference. It’s their strength and their potential weakness.

// An irreversible smart contract function

function burnTokens(uint _value) public {
balanceOf[msg.sender] -= _value;
totalSupply -= _value;
emit Burn(msg.sender, _value);
}

A misstep here, and assets could be irreversibly compromised.

Immutable Yet Vulnerable

Even the most experienced developers in the world make mistakes, and your job as a bounty hunter is to spot them!

Good news for someone getting paid for finding bugs as there are thousands of ways things can go wrong: reentrancy, arithmetic over/underflows, unexpected ether, delegate call, default visibilities, entropy illusion, external contract, short address/parameter attack, unchecked call return values, race conditions, DOS, timestamp manipulation, constructors with care, uninitialized storage pointers, floating points, tx.origin authentication …

You understand what I mean. Identifying critical issues can be challenging since they are multi-vector and complex. However, if you truly know your craft, you can be the one to highlight them and seriously make a bank. Next, we’ll help you get better at smart contract bug hunting.

Embarking On Smart Contract Bug Bounties

For those willing to get into action, here’s a roadmap.

1. Blockchain Basics & Nuances

You can be tempted to skip this step if you already feel confident in your knowledge. However, it’s never a bad idea to learn new things or dive deeper into your interests, especially considering that the world of Web3 is constantly changing.

Every week, dozens new Web3 projects, DeFi protocols, and blockchain protocols enter the market. Many are copycats or outright scams, but some are here to stay and change the industry. The following snapshot of top 10 cryptocurrencies proves the point.

Recommended resources to keep you up-to-date:

• r/CryptoCurrency for news & discussions
• CoinGecko for market information & crypto prices
• CER.live for security ratings
• Chainalysis for crypto reports
• rekt.news for hack reports & analysis
• HackenProof for new bounty programs & tips
• DefiLlama for aggregated DeFi data

2. Smart Contract Auditing: From Basics to Mastery

Study: You need a deep understanding of various programming languages, with Solidity being paramount. Resources like SWC Registry, Secereum, and Hacken Blog are gold mines for understanding smart contracts and their vulnerabilities. 

• SolidityLang: Official documentation for the Solidity language, plus a section on security.
• Ethereum.org: Official documentation & tutorials for Ethereum.
• EEA EthTrust Security Levels Specification v1: Recognized as the sole official guide for smart contract review, this specification stands as a beacon in the audit landscape. Collaboratively developed by top auditors including Hacken under the EEA’s leadership.
• SWC Registry: An essential registry of all identified vulnerabilities in the smart contract space. It’s worth noting, however, that SWC is no longer actively maintained, with its invaluable content being assimilated into the EthTrust Specification
• Secereum: A treasure trove of best practices for Solidity and Ethereum audits.
• Hacken’s Guide On Audit: A step-by-step breakdown of the professional audit process.

Environment Setup: Truffle development framework together with a configured local blockchain like Ganache is a good start. Here are the official tutorials and the most common tools and development suites:

• Truffle
• Hardhat
• Brownie

As for your editor, the easiest way to start is Remix IDE, but you can also explore alternatives. Also, check out this list of security tools for all stages of bug hunting. Regardless of your choice, proficiency in your arsenal is key.

Practice: While learning programming languages and smart contract weaknesses, it’s vital to include actual practice in your drills. 

• CryptoZombies: One of the best interactive Solidity tutorials online that will take you from Beginner to Intermediate.
• SpeedrunEthereum: Build the 7 most common functionalities in Ethereum.
• Capture Ether: A game where you hack smart contracts to learn about security.
• Ethernaut: Solidity-based wargame where you hack smart contracts.
• Damn Vulnerable DeFi: Security playground with 15 DeFi security challenges.
• CryptoHack: A game-based platform that focuses on cryptography.

The first two resources are about building smart contracts in general, the rest put emphasis on security. Note this GitHub repository provides solutions to these and other Capture the Flag (CTF) competitions. 

3. Expert Advice: Bug Hunting Tips 

Spotting vulnerabilities requires a blend of technical acumen and a strategic approach.

• Focus on Function Modifiers: `public` and `external` functions are primary attack surfaces.
• Audit Dependencies: External libraries or inherited contracts can be a chink in your armor.
• Monitor Bounties: After gaining some experience, you’ll understand the importance of prioritizing your time. You cannot jump on every opportunity. BBRadar gathers all available bounties across all platforms.

• Master a Niche: To be frank, competition is high as there’re no limits to entry. To increase your chances of getting paid, it might be a good idea to focus on a specific attack vector, protocol, or Web3 function, and excel at it.
• Follow the Scope: Companies specify their desired scope in the program description. Finding out-of-scope vulnerabilities doesn’t guarantee payment.

Real-World Examples Of Bug Hunting

Two whitehats found several critical bugs in NEAR Protocol on HackenProof and won an astonishing $1.8 million in bounties. Cases like this prove that with great skills and a bit of luck, you can earn millions as a smart contract bounty hunter.

Alex Horlan, Head of Triage at HackenProof: “The paramount outcome lies in safeguarding the security of over 25 million NEAR users.”

Indeed, that’s the point all successful Web3 projects understand: paying bounties is cheaper than getting hacked!

Wrapping Up

Leveraging bug bounty programs, especially for smart contract vulnerabilities, is no longer just an option—it’s a necessity for all modern Web3 projects, creating an additional earning opportunity for developers and researchers.

But you first need to learn the basics of blockchain, keep yourself updated with the latest news, learn Solidity, study smart contract vulnerabilities, and dive deep into actual practice. Even if you don’t locate issues worth millions, you will gain experience and skills to land a job in cybersecurity.

Web3 development is only as strong as its weakest contract. Let’s fortify it, one bounty at a time.

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