How to do a Blockchain Security Audit?

Blockchain technology has become the foundation of web 3.0 and DeFi projects. It allows to develop blockchain applications and utilizes smart contracts with blockchain transactions. Even though blockchain security is strong and relatively reliable, security issues are still present. To fight those vulnerabilities, security experts are developing ways to spot and remediate them. And one of the most effective tools in experts’ arsenal is the security audit.

Read this article and understand the benefits of the security audit and why you would apply auditing services to your blockchain project.

Why Should You Worry About Blockchain Security?

A blockchain is a software, which means that it consists of code. For example, a large cyber attack on decentralized finance in January 2020 led to a 532 million dollars loss.

Blockchain security excludes many known vulnerabilities due to its core principles, but it can’t eliminate every possible flaw in the system. What is more, security professionals still manage to find bugs, which can cause a significant loss of money.

There might be multiple reasons for that. One of them is the fact that blockchain technology was invented long ago, but it found a massive use quite recently. That is why test cases keep finding new vulnerabilities in the blockchain code.

Many people get deceived by the promises given by blockchain security. Thus, they don’t find it necessary to assess the vulnerabilities of the blockchain development project and don’t run an audit process.

What also should be considered is smart contract audit services. Practice proves that smart contract is the vulnerable element of the blockchain. Moreover, many of the cyber attacks were focused on the smart contract system. Thus, we can conclude that it’s crucial to conduct smart contract security audits to prevent losses.

What is a Blockchain Audit Process?

A blockchain audit is a manual process that suggests a source code review of the blockchain. Auditors are trained programmers with vast experience using programming languages to write blockchain code.

It is a systematic and structured code review that utilizes static code analysis tools. You will receive a final report at the end of a successful audit. It will contain all the information about the code, how secure it is, and just an executive summary.

There are a few important steps that auditors go through:

  1. Documentation review. To understand your project, auditors will review your project’s architecture, its design, and other vital documents.
  2. Preliminary code review. The audit team takes a few stages of the code review, starting with a preliminary code.
  3. Static code review. A team needs to understand how secure your system is by conducting a static code review and making an analysis of it.
  4. Code quality review. The next necessary part of the blockchain code audit is reviewing the code quality. The audit team examines a code structure, excluding possible mistakes that might lead to risks.

Stages of Blockchain Security Audits

Before launching an audit process, each blockchain developer should go through a specific thought process. It will make your blockchain code audit more effective. Thus, the money you spend on it will have much more value. And when it comes to business, it is a key.

1) What is the Goal of the Crypto Audit?

It is crucial to define what is the purpose of the future audit. Of course, having at least some kind of audit is much better than avoiding it, but there are some fine points you should look at.

First of all, a general goal is threat modeling and avoiding security risks. That is a default task for the audit team. But maybe you want to examine a specific area of the code or target system that you think is not secure enough. For example, it can be an audit of the smart contract code.

2) Define your Project and its Components

Each blockchain project has a field of use and its architecture. You will need to examine them and bring this info to the auditing team for the maximum efficiency audit. A target system has its data flows which you need to define too. It would also be great for you to review test plans so that the audit team will have a better image of your project.

3) Threat Modeling and Defining Risks

The blockchain project team should not neglect this process. This step will make identifying threats and risks your blockchain security may have easier. For example, that is one of the best ways to uncover a threat of data tampering, which usually results in fatal consequences. It also helps spot DDoS attacks, the standard tools in the criminals’ arsenal to take down blockchain project security quickly.

4) Read the Audit Report and Remediate Vulnerabilities

As soon as the security assessment is complete, you will be granted an audit report. The report will contain all the essential information and assessments of your security. Security reports are made for you to identify the threats and take specific steps to remediate them.

Remediating the issues is the final step of a security audit. With your projects reviewed by the auditing team, the information they provide you with should be sufficient to fix the issues.

An additional step: Smart Contract Security Audit

A smart contract is a part of a blockchain system, and as was stated previously, it usually has the most vulnerabilities. Smart contract audits are widespread among Ethereum smart contracts users. All the serious projects take the step of smart contract security audit as an essential part of successful blockchain security.

Smart Contract: Main Issues

It is not a rare case to face an error in the smart contract’s code. Smart contract audits intend to uncover these errors and prevent them. The most popular misconceptions countered by smart contract auditing:

  1. Reentrancy issues. This issue occurs when the smart contract makes an external call to another contract before the first one is resolved. This may lead to a systematic funds loss.
  2. Overflows and underflows. When smart contracts need to complete an arithmetic operation, but the output exceeds a storage capacity, you will face an overflow or underflow. In case of this issue, the funds which must participate in a transaction may be calculated wrong.

Conclusion

So both smart contracts and blockchain systems are pretty secure and challenging to access for criminals. But like any other network, they are not without flaws. And that is where blockchain and smart contract auditing come into play. They will prevent errors and hacker attacks on your project and save lots of funds as a result.

Frequently Asked Questions

What is a Blockchain/Smart Contract Audit?

It is a process that suggests a multi-stage examination of your network’s code to prevent any issues related to code.

What does the Blockchain/Smart Contract Audit Cost?

Blockchain/smart contract audit cost depends on the needs you have. The average cost is from 5000 – 15000 dollars.

Why would you do a Crypto Audit?

The reason is a possible amount of errors in the blockchain and smart contracts. These errors can result in significant money loss.

What are the Methods Auditors Use?

First of all, the review of a project’s documentation, then preliminary code review, static code review, and review of the code’s quality.

Who should use a Blockchain/Smart Contract Audit?

Such audits are usually used by network companies who work with money and don’t want to lose it due to errors/hacker attacks.

What is a Blockchain?

Blockchain is an immutable ledger with shared access among its participants. Its primary purpose is to facilitate transactions utilizing smart contracts. Any kind of digital asset can be a part of transactions, including cryptocurrency and even non-fungible assets like virtual real estate.
Some elements of the blockchain system are worth looking at to better understand how secure it is. First, nobody can change all the transactions recorded in the blockchain system. A distributed ledger is available to everyone who participates in the blockchain. And a smart contract is the main element of blockchain technology that makes transactions automated and fast. A smart contract system has some security vulnerabilities, which cause many troubles sometimes. We will discuss it later.
Blockchain consists of interconnected blocks of transactions. In other words, every transaction creates a block that contains all the information about it. And they stack above each other, forming a chain. The more blocks in this chain, the harder it is for criminals to hack it, as they will need to hack each previous block