Smart contract security: why audits should never be overlooked
Not considering smart contract auditing? Here’s what can happen without it.
Smart contracts are a unique tool in blockchain technology that are in high demand in various fields, including decentralized finance, banking, healthcare, and web3 gaming.
They are executed automatically based on the code’s original logic. However, correct execution according to the logic does not always ensure security. Smart contracts can be vulnerable to both malicious and accidental attacks, which can result in significant financial and reputational losses.
Conducting a thorough smart contract audit can ensure the safety and reliability of the code. It is crucial to conduct an audit to avoid the consequences of neglecting this important step.
Top Smart Contract Vulnerabilities 2024
According to a CertiK report for Q3 2023, more than $699 million was lost in 184 security incidents. Since the beginning of 2023, financial losses have surpassed a staggering $1.3 billion.
The top smart contract vulnerabilities serve as a stark reminder of the risks involved:
- Reentrancy attacks
Reentrancy attacks exploit the imperative execution nature of Solidity smart contracts. In Solidity, each line of code must be executed sequentially, resulting in a pause in the execution of the calling contract when an external call is made. This pause allows the calling contract to temporarily take control, creating an opening for an infinite loop. For example, a malicious contract could recursively call back to the original contract, draining resources without waiting for the first call to complete, preventing the original contract’s balance from being updated. There are several forms of reentrancy attacks, including single-function, cross-function, cross-contract, and read-only ones.
2. Oracle manipulation
Smart contracts use oracles to access external data and connect to off-chain systems such as exchanges. Incorrect or manipulated oracle data can incorrectly trigger smart contract executions, known as the oracle issue. This vulnerability has been exploited in decentralized financial applications, most notably in flash loan attacks. Flash loans, which are unsecured and have no borrowing limit, distort asset prices in a single transaction that follows blockchain rules.
3. Gas griefing
Gas fees are associated with transactions and smart contract executions on the Ethereum blockchain. Gas griefing occurs when a user sends enough gas for the target smart contract, but not enough for subcalls it makes to other contracts. If the contract fails to check the required gas for the subcalls, it affects the logic of the application.
4. Transaction order dependence attacks (Frontrunning)
Smart contracts are visible as pending transactions once submitted, allowing miners to select transactions with higher gas fees. This visibility allows attackers to take advantage of frontrunning opportunities by submitting identical contracts with higher gas fees to ensure their contract is processed first. Typically carried out by bots or miners due to the split-second nature of these attacks.
5. Force-feeding attacks
Force-feeding attacks take advantage of the inability to prevent smart contracts from receiving ether. By transferring Ether to a contract, developers can manipulate the expected balance, affecting any functional logic that relies on the balance for internal accounting, such as rewarding when the balance exceeds a certain level.
6. Timestamp dependence
Smart contract execution timestamps are generated by nodes, leading to potential synchronization issues in the decentralized Ethereum platform. Timestamp manipulation can be used to launch logic attacks against contracts that rely on the block.timestamp variable for time-sensitive operations.
7. Denial-of-service attack
Smart contracts, like online services, are vulnerable to DoS attacks. Overloading services, such as authentication, can block other contracts from executing, leading to unexpected contract failures and manipulation of auction results or financial transaction values to the attacker’s advantage.
8. Integer underflows and overflows
Arithmetic operations can cause integer underflows or overflows if the result falls outside the fixed-size range of values. This triggers unexpected changes in a contract’s state variables and logic, resulting in invalid operations.
9. Information and function exposure
Blockchains are public, so confidentiality is critical. Sensitive information should be encrypted, and the visibility of variables and functions within smart contracts should be carefully managed to prevent misuse or abuse.
How can we mitigate the risk of these threats?
Smart contract developers must adopt best practices and vigilantly address these vulnerabilities to ensure the security and reliability of their contracts. A pivotal tool in this regard is smart contract auditing.
During auditing, developers, experts in smart contract creation, rigorously test for basic vulnerabilities, conduct controlled environment testing, align contracts with expected business logic, model threats, and utilize advanced techniques such as property testing and fuzzing. Auditing is not just important; it’s a serious issue that demands the expertise of trusted companies with high proficiency in smart contract development.
Read more: Smart contracts explained: key points
Benefits of smart contracts audit
1. Risk identification: Audit helps in identifying potential risks and vulnerabilities in smart contract code. It allows for a thorough assessment of the codebase, reducing the likelihood of unforeseen issues.
2. Code optimization: Through the auditing process, developers receive valuable feedback and recommendations for optimizing their code. This can lead to improved efficiency, reduced gas costs, and enhanced overall performance.
3. Security enhancement: Audits uncover vulnerabilities and weaknesses in the smart contract, enabling developers to address and fortify security measures. This is essential to protect the contract from malicious attacks and unauthorized access.
4. Preventing financial losses: Identifying and rectifying vulnerabilities early in the development process prevents potential exploits. This safeguards against financial losses that could occur due to hacking, fraud, or unexpected behavior in the smart contract.
5. Adherence to best practices: Smart contract audits ensure that the code follows industry best practices and standards. This includes proper coding conventions, secure coding patterns, and efficient use of resources.
6. User confidence: Users, especially in decentralized applications (DApps) and blockchain-based projects, are more likely to engage when they have confidence in the security of smart contracts. Audits contribute significantly to building this confidence.
What’s next?
Crypton Studio, recognized as one of the top smart contract development companies by Clutch, places significant emphasis on auditing among other essential services. With experienced developers ensuring reliability, stability, and proper operation, Crypton Studio stands as a trusted partner in navigating the complexities of smart contract development and security.
Need help? Contact a manager for a free consultation.
