Smart Contracts Audit: Why You Need It, Steps

Audits are vital to the global blockchain ecosystem. Any developer who wants to deploy a smart contract or decentralized app must first have it audited for security and operational bugs. Otherwise, they might release a bug-riddled app that hackers can easily exploit. This article will explain smart contract auditing, its steps, and why you need it as a blockchain developer.

What is a smart contract audit?

An audit is an extensive review of a contract’s codebase to identify security flaws, inefficient code, and solutions to the identified issues. It involves blockchain and cybersecurity experts thoroughly reviewing the codebase to detect flaws based on their knowledge and experience.

Audits are necessary for any smart contract or decentralized app released to the public. Because of their decentralized nature, which makes transactions mostly irreversible, hackers often target blockchain apps. Hence, contracts must be audited to detect and fix any security flaws malicious actors could exploit.

How to audit smart contracts

The main steps of auditing smart contracts are as follows:

Step 1: Documentation

The developer provides detailed technical documentation about their contract, including its whitepaper, codebase, structure, and other relevant materials. Auditors will study this documentation to understand what the developer wants to achieve and what needs to be extensively reviewed. The developer initiates a code freeze, i.e., making no changes to the codebase during the audit.

Step 2: Automated testing 

Auditing begins with using automated tools to find vulnerabilities. These tools are good at finding mundane security bugs hackers can easily exploit. Any identified error is duly documented, and the next step is the manual review.

Step 3: Manual review

Here, auditors deeply review the codebase to find tricky flaws. Automated tests can identify mundane errors, but you need manual review to find issues that are technically correct but affect your contract’s security and performance. For example, a manual review can identify opportunities to reduce transaction fees (gas fees) or boost transaction speed. This process goes a long way in attracting users to your blockchain app. 

Step 4: Error documentation

The auditing team formally documents all the errors they identify. Then, they collaborate to find solutions to these issues. Errors must be succinctly explained so the developer can easily understand. The errors are classified according to severity—low, medium, and high—to help the developer prioritize the fixes.

Step 5: Initial report

Auditors submit the initial report to the developer, detailing all the errors and suggestions for fixing them. The developer then implements these fixes and confirms with the auditor.

Step 6: Final report

The auditor prepares a formal report certifying that the contract has been audited and that the issues have been fixed or remain outstanding. In this report, all detected bugs are grouped by severity. The ones that have been addressed are marked “resolved,” and those not yet addressed are marked “not resolved,” followed by a discussion of their potential impact. 

This final report is posted publicly to build user trust. It offers transparency, letting the end user know any vulnerabilities in the blockchain app and whether they’ve been addressed.

How much does smart contract auditing cost?

The cost of an audit depends on several factors, mainly the codebase size and complexity. The longer it takes to review a codebase, the more auditors charge. Auditing firms have varying hourly rates, so you can find one within your budget. However, cheaper is not always better. Auditing might be expensive, but it’s worth the price when it saves your contract from being exploited by hackers.