Blockchain technologies have become extremely popular nowadays due to obvious benefits such as decentralization, solid security, transparency, affordability, and many others. Some of the most popular blockchain-based platforms such as Ethereum, EOS etc. utilize smart contract which allows two or more parties to carry out any transactions in a safe and trusting manner.
Benefits of smart contracts
Transparency. When using technology, transparency is one of the most important elements due to the cultivating mutual trust. A smart contract implies stating detailed terms and conditions by parties involved in the process. This eliminates the chance of conflicts and numerous issues emerging during conventional contracts. As a result, the transactions are transparent and miscommunications are mitigated. In essence, that is what smart contracts are all about.
Time-saving. Usually, conventional contracts are accompanied by large amounts of bureaucratic work that slows down the process of executing the stipulated conditions of the contract. Smart contracts offer a completely different situationbecause they eliminate intermediaries and unnecessary bureaucratic steps. Choosing blockchain technology, in this case, can save lots of time.
Security. Smart contracts provide the highest level of security due to the decentralized and dynamic character of the technology. However, it’s extremely important to follow those basic steps given in the article to avoid all known vulnerabilities.
Affordability. Using smart contract allows companies to avoid a number of expenses associated with a traditional contract. There is no need to involve any third parties except those actually involved in the transaction which eliminates the need for paying their services.
Trustless manner. When using smart contract, all the details, obligations and conditions of the deal are executed timely and automatically which allows participants to avoid possible manual errors.
ESSENTIAL QUESTIONS ABOUT SMART CONTRACTS
So, what is a smart contract? Generally speaking, smart contract takes the form of a decentralized ledger allowing parties to exchange digital assets without intermediaries in a secure and cost-efficient way. Quite understandably, this raises another question: who audits a smart contract? Basically, any blockchain-based company or corporation striving to secure their digital assets and provide the utmost security to their clients would benefit from auditing their smart contracts. The capacity of smart contracts to provide various advantages for interested parties makes their technology so widely used.
Despite the highest level of cyber security of a blockchain platform, smart contracts may be compromised due to system vulnerabilities and the errors occurring during the process of a smart contract development. The most vivid example that made headlines across the world is the DAO hack. The malicious user managed to steal more than $3.6 ETH by finding a number of vulnerabilities. This unfortunate smart contract example confirms the importance of the proper security level of a platform responsible for huge finances.
It’s crucial to perform smart contract audit in a timely manner in order to minimize potential risks and to ensure the safety of the technology.
Precise specifications (technical task). The most widespread vulnerabilities are logic. To prevent such vulnerabilities from occurring and to achieve the best possible results of a smart contract, it’s necessary to establish an accurate and detailed technical task. It should include the details of how the smart contract should function under all the conditions, how the access should be distributed, etc.
Reliable auditor. It’s very important to order a smart contract audit from a trustworthy and well-known company. Often, an audit is performed for marketing purposes which means that companies try to cut the budget for it. Of course, it can be tempting to hire a person without experience to perform a much affordable smart contract audit. However, the critical vulnerabilities will remain, potentially costing the company a fortune.
Independent audit. It’s necessary to perform a security audit by professionals in order to detect all known vulnerabilities. Often, an independent check is necessary for complying with the exchange’s conditions.
Second independent audit. A smart contract audit doesn’t give any guarantees. The more complicated the contract is the higher the chance that something will be missed. Therefore, it’s recommended to carry out two audits in order to minimize the risks.
Manual audit. This is a necessary step because auto scanners can miss logical vulnerabilities while the manual audit allows detection of such bugs. Performing a manual audit for providing the proper security level is a must. For instance, recently the Oyster Smart Contract was hacked despite 3 separate audits. You may ask how that happened? The thing is that all 3 audits were automated and they didn’t find a logical vulnerability that allowed directorship of the contract to remain open so that peg could be adjusted. As a result, directorship was transferred by the original Ethereum addressed controlled by Bruno Block, allowing a new director to mint 3 mil new PRL.
As you can see, the 5 steps mentioned above are extremely important in order to receive the best possible results in terms of cybersecurity. Certainly, performing the proper smart contract audit with a reputable and reliable company allows avoiding possible losses of millions of dollars as well as the clients’ loyalty. This is exactly why any organization willing to provide the highest security level for their products or services should understand what smart contract is and why smart contract audit is so important.
How Hacken can Help
At Hacken, we take security extremely seriously, and all the checks are performed according to the highest standards. If you have any questions about the smart contract audit or need a consultation, feel free to contact our Team! Contact a Specialist