Smart Contract Security: Ensuring Safety At Each Development Stage

Smart contracts, with their immense flexibility, manage significant amounts of value and data, executing immutable logic based on code deployed on the blockchain. This has led to a flourishing ecosystem of trustless and decentralized applications, offering numerous advantages over traditional systems. However, this also presents opportunities for attackers to exploit vulnerabilities in these smart contracts.

In Q3 of 2023 alone, the crypto industry was hit hard with losses totaling $720 million, with reentrancy and flash loan attacks being major contributors. These attacks, which accounted for $85 million and $5.8 million, respectively, highlight the intricate and technical nature of threats facing smart contracts.

To counter these threats, we will guide you through the various stages of secure smart contract development, providing practical advice and comprehensive guidelines for enhanced security.

What Is Smart Contract Security?

Smart contract security refers to the measures and practices used to protect smart contracts from vulnerabilities and attacks in blockchain networks. This includes preventing vulnerabilities at every stage – design, development, testing, deployment, and ongoing maintenance – ensuring that the contracts function properly, handle transactions securely, and reliably execute their programmed logic without risk of manipulation or error.

This security is crucial because it protects against financial loss, maintains operational continuity, and upholds trust in decentralized systems. Effective security measures include rigorous coding practices, comprehensive testing, vigilant deployment strategies, and ongoing monitoring and updates.

The goal is to minimize risks and guarantee that smart contracts operate as intended, without being vulnerable to attacks or failures.

Transitioning from the general overview, let’s explore the critical phases of developing secure smart contracts.

Smart Contracts Development Overview

Developing secure smart contracts involves several key phases, each of which requires careful attention and understanding.

1. Design Considerations for Secure Smart Contracts: We will explain the fundamentals of smart contract design and emphasize the importance of understanding the blockchain, keeping the design simple and modular, and more.

2. Secure Smart Contract Development Practices: We will share effective practices for secure smart contract development.

3. Testing and Reviewing Smart Contracts: This section will highlight the importance of thorough testing and introduce various tools to aid in the analysis of your smart contracts.

4. Deployment of Secure Smart Contracts: We’ll discuss the key security considerations during the deployment phase of your smart contracts.

5. Maintaining Smart Contract Security: Lastly, we’ll emphasize the need for ongoing monitoring and updates to keep your smart contracts secure over time.

In each phase, we’ll incorporate real-world examples and insights to make these complex aspects of smart contract development easier to understand and implement, whether you’re a seasoned Web3 developer or a curious entrepreneur.

Design Considerations For Secure Smart Contracts

Designing secure smart contracts necessitates a comprehensive understanding of several foundational concepts, as well as a commitment to certain design principles.

1. Thoughtful design of the system’s underlying business logic is paramount for secure smart contract development. The logic should be robust, clear, and congruent with the project goals.
   
   Designing this logic is not just about imitating existing market solutions but understanding them, their strengths, weaknesses, and then improving upon them. This process involves studying similar challenges faced by others, learning from them, and employing those insights to enhance your own design.
   
   Remember, each system is unique, and what works for one might not work for another. Therefore, critical analysis of your own solution is essential to identify any potential pitfalls. Consider edge cases your system might encounter and how your smart contract would address them. Be vigilant for any exploitation opportunities arising from your implementation, as to the ‘slippage’ example(will be described below).

2. Grasping the essence of blockchain technology is an indispensable prerequisite. This involves understanding how transactions work, the details of distributed ledgers, and the implications of public and private keys. Furthermore, a comprehensive understanding of the integration of third-party systems is of paramount importance when developing a secure smart contract. A real-life example from an audit of UniswapV3 integration clearly illustrates what can happen when full comprehension is lacking:

function UniV3SwapInput(
    bytes memory _path,
    uint256 _sellAmount
) public override onlyBalancer {
    IV3SwapRouter.ExactInputParams memory params = IV3SwapRouter
        .ExactInputParams({
            path: _path,
            recipient: address(this),
            amountIn: _sellAmount,
            amountOutMinimum: 0
        });
    uniRouter.exactInput(params);
}

In this code fragment, a UniswapV3 swap operation is performed with _sellAmount as the input amount and amountOutMinimum set to zero. This setting, where the minimum number of output tokens (amountOutMinimum) is set to zero, can potentially lead to an issue commonly referred to as “slippage.”

In the context of decentralized exchanges like Uniswap, slippage signifies the discrepancy between the expected trade price and the actual executed trade price. It often surfaces during periods of high market volatility when market orders are used. Here, due to the absence of a lower limit, the trader could end up receiving less than anticipated due to market fluctuations.

Detecting such an issue can be tricky during testing, as it predominantly manifests in certain market conditions. For developers, spotting this kind of vulnerability is equally challenging. Despite thorough planning and rigorous testing, these subtleties can be overlooked, underscoring the vital role of auditing in the development process and the need for specialized auditors to uncover and address such concealed risks.

3. The principle of simplicity and modularity is another pillar in smart contract design. Simplicity mitigates the risk of concealed bugs and fosters a better understanding among developers and users. Modularity, which involves segmenting a program into individual functional components, allows for isolated error identification, eases troubleshooting, and enhances flexibility in development.

4. Upgradeability must also be contemplated in the initial design phase. As blockchains are immutable, smart contract upgrades require the implementation of strategies such as utilizing proxy contracts, segregating data and logic, and ensuring forward compatibility.

Secure Smart Contract Development Practices

With your smart contract system’s architecture meticulously planned, the third-party services to be utilized fully comprehended, and the update strategy well-considered, you are now well-prepared to proceed with the development phase.

Beyond the frequently repeated secure development tips like:

• Using the most recent Solidity version.
• Limiting contract capabilities.
• Implementing Assert, Require, and Revert functions.
• Adhering to the Checks-Effects-Interactions pattern.
• Prudently assigning roles and their permissions.
• Testing smart contracts.

I would like to add my own advice to this list:

1. Prioritize Gas Optimization: The gas-limited nature of smart contracts necessitates mindful optimization. Each operation incurs gas costs, which can be quite volatile. Optimize your code by eliminating unnecessary computations, choosing suitable data types, and taking into account the gas costs of external contract calls. Consider variable packing and evaluate the gas efficiency of loop operations. This not only reduces interaction costs but also mitigates the risk of out-of-gas errors that could be exploited. We will discuss tools for checking gas usage in the following section.

2. Handle Third-party Integrations with Care: As previously noted, understanding the services you plan to use is essential. Know the function of each variable, scrutinize potential pitfalls, and ensure data sources’ relevance. For example, prices from ChainLink must be validated for timelines, as they might be outdated.

3. Follow Official Style Guidelines and Use NatSpec Documentation: Coding according to official style guidelines and documenting with NatSpec significantly improves code readability. This is particularly beneficial for third-party developers and auditors who may need to review your code. This enhanced understanding can reduce the likelihood of errors and security issues.

Testing And Reviewing Smart Contracts

The importance of thorough testing in smart contract development can’t be overstated. Given the immutable nature of smart contracts and the high-value transactions they handle, any overlooked bug or vulnerability can lead to irreversible consequences. Therefore, unit testing is crucial, ideally aiming for 100% code coverage. This ensures that every function, branch, and line of code has been validated, reducing the potential for unanticipated behavior or exploitations in the live environment.

To test the coverage of the Solidity code, I recommend using the Solidity Coverage plugin. It pairs effectively with the Solidity Gas Reporter (built-in for Hardhat and available as a standalone plugin for others), which helps you test the execution of your smart contracts, transaction costs, and other aspects across different networks.

I also strongly advocate for the use of mutation testing, a methodology where “mutations” or modifications are made to the system under test (SUT). This produces slightly different software versions, and testing these variants helps assess the ability of tests to detect changes, thus measuring the quality of the test suite and pinpointing under-tested software areas.

SuMo, specifically designed for Solidity-based smart contracts, serves as a great mutation testing tool. By injecting minor faults or “mutations” into the source code and assessing whether these alterations are picked up by test suites, SuMo can gauge the robustness of your tests. This exercise helps uncover weak spots in your tests and thereby enhances their overall quality.

SuMo stands out with its variety of mutation operators, both traditional and unique to Solidity, that can be toggled on or off depending on the project requirements. It also offers customization options for the mutation testing process, allowing the selection of specific contracts and tests for mutation. Moreover, SuMo’s testing interface is versatile and compatible with different testing frameworks and blockchain simulators.

See a pull request on GitHub for a deeper dive into SuMo: https://github.com/MorenaBarboni/SuMo-SOlidity-MUtator. 

In addition to the practices above, using smart contract analysis tools such as Slither, Solgraph, Mythril, Echidna, MythX, and Semgrep is highly recommended. These tools aid in detecting potential vulnerabilities, visually representing contract dependencies, analyzing security properties, and scanning for known issues. Utilizing these tools allows for a thorough review of your contracts and enhances overall security.

Conducting security audits is another vital step in ensuring the robustness of your smart contracts. An audit provides a systematic examination of the contract’s code by an independent entity to identify any vulnerabilities or bugs. This process offers an added layer of assurance on the safety and integrity of the contracts before they’re deployed.

Deployment Of Secure Smart Contracts

The deployment phase of a smart contract is as crucial as its development. The integrity of the deployment process significantly affects the security and operability of the contract. Thus, several considerations must be addressed to ensure a smooth and secure launch. Here are some general tips:

1. Use Test Networks First: Always deploy the smart contract on a test network (Ropsten, Rinkeby, Kovan) first. This enables you to perform testing on a network that mirrors the mainnet but doesn’t carry the risk of losing real funds.

2. Multiple Rounds of Testing: Perform multiple rounds of testing at different levels – unit testing, integration testing, system testing, and acceptance testing. This helps to identify any bugs or vulnerabilities at each level.

3. Use a Repeatable, Automated Deployment Process: This can be accomplished using scriptable deployment tools like Truffle migrations. The goal is to ensure that your deployment process is deterministic, repeatable, and can be automated as much as possible.

4. Time-Lock Additions: Incorporate time-locked upgrades or changes. This gives users time to react if they disagree with the changes, providing an additional layer of security.

5. Limit Function Permissions: Limit the permissions of each function in the contract, especially those relating to the deployment and administrative privileges. This is to prevent unauthorized access and protect against attacks.

6. Verify Source Code: After deployment, verify your contract’s source code on an explorer like Etherscan. This process improves transparency, as anyone can then read the contract and understand its capabilities.

7. Emergency Stop Mechanism: Include an “Emergency Stop” mechanism in the contract. This enables pausing certain functionalities of the contract in the event of a detected anomaly or a bug.

Maintaining Smart Contract Security

As we transition into the post-deployment stage, it’s crucial to recognize that maintaining security is not a one-time task that ends with the deployment of a smart contract. Rather, it’s an ongoing process that demands continuous monitoring and consistent maintenance. Here are some effective strategies for managing and maintaining the security of smart contracts that are already deployed:

1. Implementing real-time tracking systems for continuous monitoring of your smart contracts is an effective strategy. Systems such as Hacken Extractor can alert you to any abnormal activities, such as sudden spikes in transaction volumes, suspicious transactions, or significant changes in contract balances. Monitoring the gas usage of the contract can also provide valuable insights into its interactions with the network, helping to identify potential areas for optimization or the presence of issues.

2. Another significant aspect of post-deployment security maintenance is the effective use of bug bounty programs. By setting up a bug bounty program, you can incentivize the community to aid in the discovery and reporting of vulnerabilities in your smart contract. Platforms like HackenProof offer specialized services for managing these programs, ensuring a secure environment for the process. This not only enhances the security of your contract but also builds trust with your users by demonstrating your commitment to security.

3. Finally, staying updated with the latest vulnerabilities discovered in the ecosystem is key. Platforms such as the Ethereum Security Community curate and maintain lists of the latest smart contract vulnerabilities. Regularly checking these platforms or subscribing to their updates can keep you informed about potential threats.

In sum, the key to maintaining smart contract security lies in the perpetual cycle of monitoring, auditing, updating, and fostering a security-first culture within your team.

Conclusion

The five key stages—design, development, testing and reviewing, deployment, and maintenance—each demand its own unique security considerations. Thoughtful and robust design, diligent development, thorough testing, careful deployment, and ongoing maintenance are all critical aspects of this process. Furthermore, being informed about the latest vulnerabilities and leveraging the power of the community through initiatives like bug bounty programs can significantly bolster the security of your smart contracts.

Ultimately, the secure creation, deployment, and maintenance of smart contracts require an interplay of robust understanding, meticulous planning, comprehensive testing, and constant vigilance. The potential consequences of inadequate security—ranging from financial loss to reputational damage—emphasize the importance of these efforts. Equipped with these insights and practices, developers and teams can contribute to the realm of secure smart contracts in the continually evolving blockchain technology.

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