What Is a Smart Contract Audit and Why You Need It

Smart contracts are self-executing agreements with the terms and conditions of the contract directly written into the code. They run on blockchain networks, such as Ethereum, and automatically enforce the contract's rules without the need for intermediaries. Since smart contracts are decentralized and immutable, they offer increased security, transparency, and efficiency compared to traditional contracts.

1. Smart Contract Security and Its Importance

However, as with any new technology, there are also potential risks and security concerns. Smart contract security refers to the measures taken to ensure that smart contracts are free from vulnerabilities and function as intended. This is crucial because smart contracts manage and transfer digital assets, and any vulnerability can lead to significant financial losses. Moreover, since smart contracts are immutable, any bugs or security issues can't be easily fixed after deployment, making it even more essential to ensure their security beforehand.

2. Security Risks in the Web3

As the next generation of the internet, Web3 promises to revolutionize the way we interact with the digital world. However, with new technology comes new security risks. Listed below are some of the major security risks in the Web3 domain.

Wallet Attacks

Wallets are tools for storing digital assets, and they are a critical component of the Web3 ecosystem. One risk with wallet is hackers infiltrating users' wallets to steal digital assets. These attacks can be carried out through phishing emails, malware, social engineering, and other means.

Distributed Denial of Service (DDoS) Attacks

DDoS attacks are a common network security threat that can affect the Web3 ecosystem. DDoS attacks overwhelm a network by sending a large number of requests, resulting in network service interruptions that can affect application availability and threaten the security of users' digital assets.

51% Attacks

In blockchain, a 51% attack occurs when a hacker gains control of more than 50% of a network's computing power. This can allow the attacker to control the entire network and potentially steal users' digital assets. While 51% attacks are less likely to occur in larger blockchain networks, they pose a real threat to smaller networks.

3. Smart Contract Attacks

Now that we have explored the main security risks in the Web3 field, let's dive deeper into the types of attacks that target smart contracts.

Reentrancy Attacks

Reentrancy attacks exploit a vulnerability in the smart contract code that allows an attacker to execute the same function repeatedly before the previous execution is complete. This can allow the attacker to drain the smart contract of its funds.

Integer Overflow and Underflow Attacks

Smart contracts use integer variables to store and manipulate data. Integer overflow and underflow attacks occur when a variable's value exceeds or falls below the range of its data type. This can cause the contract to behave unexpectedly and may allow an attacker to exploit the vulnerability to steal funds.

Time Manipulation Attacks

Time manipulation attacks exploit the fact that smart contracts rely on timestamps to perform certain functions. Attackers can manipulate the timestamps to bypass certain time-based security measures and steal funds.

As we can see, Web3 faces various security risks, and smart contracts are a prime target for attackers. Developers and users must take effective security measures to ensure the safety of digital assets and DApps.

4. What is a Smart Contract Audit?

Smart contract auditing is the process of reviewing and analyzing smart contracts to identify potential vulnerabilities, errors, or compliance issues. The audit process involves a thorough review of the smart contract's code to ensure that it is secure, reliable, and compliant with legal and regulatory requirements. The audit process is carried out by a team of experienced auditors who have a deep understanding of blockchain technology, smart contract design, and security best practices.

The importance of smart contract auditing cannot be overstated. Auditing helps to identify any potential vulnerabilities or errors that could compromise the security and integrity of the smart contract. If these vulnerabilities or errors are not identified and remediated, they could lead to significant financial losses or legal liabilities. Additionally, auditing helps to ensure that the smart contract is compliant with legal and regulatory requirements, which is critical in industries such as finance and healthcare.

The smart contract auditing process typically involves several steps, including planning and preparation, source code review, functional testing, security testing, compliance review, and reporting. The planning and preparation stage involves defining the scope of the audit and identifying the purpose of the smart contract. The source code review involves a thorough review of the smart contract's code to identify any potential vulnerabilities or errors. Functional testing involves testing the smart contract's functionality and user experience, while security testing involves conducting vulnerability scans and penetration testing to identify and remediate any security vulnerabilities. Compliance review ensures that the smart contract is compliant with legal and regulatory requirements, while the reporting stage involves generating a comprehensive report that summarizes the audit findings and provides recommendations for improvement.

By conducting smart contract audits, organizations can ensure that their smart contracts are secure, reliable, and compliant, and minimize the risk of financial losses or legal liabilities.

5. Smart Contract Audit Company

Beosin has audited more than 3,000+ smart contracts and assisted projects in discovering and fixing more than 1,000 medium to high-risk security vulnerabilities. These projects come from Ethereum, EVM-compatible chains, Solana, Near, EOS, aelf, and other blockchain platforms. Beosin audits the smart contract in 3 categories: Coding Conventions, General Vulnerability, and Business Security. Combining the results from automated formal verification and manual code review by security experts, Beosin can precisely identify the security problems in smart contracts and assist the project party in fixing them to avoid crypto loss.

At present, Beosin has audited more than 3,000 smart contracts and protected over $500 billion of assets for customers. The smart contracts audited by Beosin have never suffered any major theft due to security vulnerabilities so far. After the upgrade, Beosin's auditing service comes with the following advantages.

Advantage 1

Beosin use Formal Verification Technique to make your smart contracts "invulnerable"

Formal verification is one of the most demanding methods of code security. Its effectiveness has been proven in aerospace, military and other fields. In the current blockchain and smart contract security business, formal verification is showing great potential. This "mathematical inference" based verification method can precisely prove whether there are security vulnerabilities in the code, while effectively solving the problem of heavy reliance on human experience and inexhaustibility of traditional techniques such as manual testing.

Beosin's top formal verification experts told us, "Beosin's library of smart contract security issues and reusable smart contract security attribute invariants accumulated through years of extensive contract security auditing practice, as well as a hybrid machine engine for automated detection, testing, and verification with high path coverage, are key to ensuring the quality of security audits.”

Advantage 2

As one of the world's first companies specializing in blockchain security, Beosin's founders are among the world's first experts to apply this technology to smart contract security auditing, and they have more than 20 years of experience in formal verification. Beosin VaaS, with 97% automated detection accuracy, can automatically detect hundreds of security issues of smart contracts in "one click".

VaaS can automatically find known and unknown vulnerabilities and business logic issues in smart contracts as well as providing professional recommendations for fixing them. It supports hundreds of general security vulnerabilities and business logic defects detection for smart contracts of all public chains of EVM and WASM. It helps developers to improve the security capability of smart contracts by giving modification suggestions while pinpointing where the risky code is located.

Advantage 3

Strict security audit process to build a strong security defense

In terms of the standardization of the auditing process, Beosin includes at least 5 sessions of auditing steps, where automated code security scanning is combined with manual auditing by security experts and formal verification experts. Each step is cross-checked by two or more security experts and formal verification experts to avoid omissions due to human factors as much as possible.

After completing a round of audit, Beosin will issue a Feedback of the problems found, which includes description of the vulnerability, recurrence method, fixing suggestions, etc., and then submit it to the project party and assist the project party to finish fixing the vulnerability. How to modify the code. Few other security companies offer such a service.

In addition, Beosin security auditing experts have conducted in-depth analysis and summary of smart contract security issues for different applications (such as DeFi, NFT, GameFi, etc.) for web3 projects, and categorized and condensed a rich library of smart contract security issues.

Finally, the formal verification experts abstract the security issues condensed by the security audit experts into reusable security attribute invariants using strict mathematical logic. We then feed them into the hybrid machine engine for automated detection, testing, and verification. This has proven to be effective in discovering new subtle vulnerabilities in smart contracts.

Advantage 4

Audited projects are listed on Beosin EagleEye - the security monitoring, alerting and blocking platform, providing 7x24 real-time risk alerts.

Projects audited by Beosin will be listed on Beosin EagleEye, the security monitoring, alerting and blocking platform for free, providing 7x24 real-time risk alert. Beosin EagleEye uses AI and other technologies to automatically detect the security status of contracts, monitor the on-chain operational status and transaction behaviour, automatically identify abnormal transactions, and comprehensively assess the security operation status of the project. It can help projects discover risky transactions such as Flash Loan attacks, arbitrage transactions, and theft of funds due to private key compromises. Now Beosin EagleEye has been updated and iterated, its "blocking" function has been officially implemented, which can protect your property to the maximum extent.

Advantage 5

Experienced Beosin team, widely praised by Web3 partners

Beosin smart contract security audits, including asset security audits, business logic audits, backdoor audits, Flash Loan attack audits, arbitrage attack security audits, re-entrancy attack audits, function call safety audits, code standards audits, etc. Beosin will issue an authoritative security audit report. The report will contain details of any identified vulnerabilities and categorize them by severity (critical, high, medium, low and info) and recommended remediation. Charts are included to provide visual insight into the program and help you understand the source of identified vulnerabilities.

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