Security Audit

An Introduction to Smart Contract Security

Updated on: August 26, 2021

An Introduction to Smart Contract Security

Smart Contracts are becoming the forefront of Blockchain technology. It is catering to almost every industry segment with a variety of transaction use cases. From Finance and IoT to the Supply Chain and Music industry, the implementation of smart contracts is everywhere in our daily life. 

While the transparency of a smart contract implementation is for all the users of a said blockchain, it can pose a situation where the security loopholes and vulnerabilities are also visible to all the users. These potential security weaknesses can be exploited by hackers or cybercriminals to further damage an organization’s smart contract – ultimately impacting loss of revenues and resulting in customer data exposure.

In this article, we’ll be discussing the functioning of a smart contract security, its proper implementation and other aspects for securing a smart contract-based platform against cyberattacks and hacking attempts.

So, let’s dig in.

What is a Smart Contract and how does it work?

In a nutshell, a smart contract is a set of programmed agreements that consist of functions and data that gets automatically executed whenever a network tries to access it for a transaction asked by a user.

A smart contract is a type of Ethereum Account that runs on a blockchain-based platform known as Ethereum blockchain. An Ethereum Account consists of ether (ETH) as a balance. Users accounts can communicate with a smart contract and access the data by submitting a transaction. This transaction executes a predefined function on the smart contract which gives the user access to the data present in a smart contract.

A computer scientist, lawyer and cryptographer Nick Szabo primarily defined smart contracts as “Building Blocks for Digital Markets” back in 1996. He stated that the “smart” in smart contract is “because they are far more functional than their inanimate paper-based ancestors. No use of artificial intelligence is implied.”

Further, Nick terms smart contract as a digital vending machine. A vending machine that operates through a “contract” that gets executed whenever a person puts money in the machine and gets the product. Of course, smart contracts are used in a more sophisticated way while doing cryptocurrency transactions. 

For example: To get a drink from a vending machine:

money + drink selection = drink dispensed

What are the different types of Smart Contracts?

Smart contracts are created and deployed over a network using programming languages such as Solidity and Vyper and you need to have enough ETH for the deployment (using Gas). 

Smart contracts are classified into 4 different types according to their usage by programmers for building applications. Here are the types:

  • Decentralized Autonomous Organizations (DAOs) – involves a set of rules established and controlled by organization members and not influenced by external entities.
  • Smart Legal Contracts – involves strict legal resources (also known as legally enforceable smart contracts).
  • Contracts of Applied Logics (ALCs) – built on a decentralized network that combines a smart contract with the frontend user interface.
  • Distributed Applications (daaps).

Recent Cyberattacks on Blockchain/Smart Contracts?

Following recent events shows that the smart contract as blockchain technology is not immune to cyberattacks and vulnerability exploitation:

  • In 2017, $150 million worth of ETH were stolen from an organization named Parity technologies due to a critical vulnerability present in their Ethereum smart contract.
  • In 2016, a DAO called Genesis DAO was hacked by a hacker(s) exploiting a security loophole in the system. Hackers stole $50 million worth of ETH from Genesis DAO’s crowdfunding investors.
  • This month, in August 2021, one of the biggest cryptocurrency heists happened. Hackers stole $613 million worth of digital currency from a company named Poly Network. They exploited a vulnerability in the digital contracts Poly Network uses.

How can Smart Contracts be secured?

One of the main reasons behind organizations using smart contracts technology is due to its strong security posture. It acts as a lawyer (with an agreement) between two parties involved in a transaction. 

However, there have been many instances where the platforms running on smart contracts were compromised due to the unhealthy implementation of smart contracts during SDLC, improper security measures or vulnerability exploits.

Security of smart contracts starts before writing the first line of code – during planning, design and development processes and ends with securing against cyberattacks and potential vulnerabilities such as re-entrancy, front running, ETH send rejection, integer overflow/underflow, DoS, Insufficient Gas briefing, RCE and many others mentioned in Smart Contracts Weakness Classification Registry (SWC Registry)

Here are some points on how you can secure smart contracts against attacks and vulnerabilities:

  1. Write a more secure smart contract code with best practices followed by leading organizations.
  2. Periodically perform smart contract security audits and penetration testing.
  3. Follow a blockchain security checklist.
  4. Run automated security scans on a smart contract.
  5. Use the trusted blockchain tools for design, development, security, auditing, and exploiting.

Let’s now discuss the above five points in more detail:

1. Smart Contract Secure Coding Best Practices

Smart contracts are developed using different programming languages such as Solidity, Vyper, Go or Java, etc. It is important to follow all the identified and publicly available resources for coding a secure smart contract. Here are some best practices that you can follow during your smart contract design, implementation and deployment phases:

  • Clearly describe what the smart contracts do and any assumptions on the codebase in plain English.
  • Generate schemas and architectural diagrams using Slither printers.
  • Do thorough code documentation using Natspec format (for Solidity).
  • Keep as much code as you can off-chain.
  • Document the procedures of migration or upgrading before the deployment.
  • Function composition – write small and meaningful functions, split the logic either through multiple contracts or grouping similar functions.
  •  Inheritance – try to shorten the inheritance tree, you can use Slither’s inheritance printer to check hierarchy.
  • Implement logging of all events and operations.
  • Be aware of the warning section mentioned in Solidity’s documentation.
  • Use well-tested libraries.
  • Avoid copy-paste and use a dependency manager.
  • Write detailed unit tests.
  • Write customer checks and properties with Slither, Echidna and Manticore.
  • Use the recommended version of the programming language compiler
  • Regularly monitor your contracts after deployment.
  • Implement security for the wallets of your privileged users using cryptography.
  • Craft an incident response plan. Smart contracts can be hacked.

2. Perform Smart Contract Security Audit and Pentesting

Even though your smart contract is bug-free and securely developed, hackers can always find a way to exploit potential security loopholes and vulnerabilities. They can either compromise a smart contract or an entire blockchain platform and steal thousands and millions worth of cryptocurrency. 

A periodic penetration testing and security audit for a smart contract is the solution to this problem. Security audits and pentesting helps you uncover these potential vulnerabilities in your system and gives you time to fix these weaknesses before a hacker(s) tries to exploit them and hack your platform.

Here are some steps you can take to do a smart contract security audit and pentesting:

  • Do a static analysis of your code to identify style inconsistency and vulnerable code.
  • Perform security analysis for your smart contract using trusted tools like Mythril, MythX, Echidna, Oyente, Manticore, ERC20 Verifier.
  • Test for all the vulnerabilities mentioned in the SWC Registry.
  • Organise a bug bounty program during testing. Use a testnet like Rinkeby.io or Kovan. 
  • Do the penetration testing in-house if you have an experienced security team available in your organization.
  • Generate a detailed report on identified vulnerabilities in your system and recommendations for fixing those vulnerabilities.
  • If your internal security team isn’t capable of conducting a security audit or pentesting for your smart contract then get the external security auditors that can do the job for you.

We at Astra Security helped many blockchain platforms with security audits and penetration testing for their smart contracts and blockchain apps. Our pentesting tool Astra Pentest is easy to understand and offers a centralized management dashboard for the security and management teams. Further, our highly professional and certified auditors make sure no single vulnerability or security loophole goes unnoticed.

3. Follow a Blockchain Security Checklist

It’s always a good practice to follow well-researched and practically implemented checklists for the security of your blockchain. 

Download this exclusive Blockchain Security Checklist

Also, do check these related resources:

4. Use Automated Vulnerability Scanners

Using an automated security vulnerability scanner can help you with the security analysis of your smart contract. It can help you identify bugs in the code that can lead to security vulnerabilities and can also help you prevent a variety of attacks. You can use this open-sourced security scanner for Ethereum smart contract which is supported by Ethereum Foundation called Securify.

You can also use Astra’s Vulnerability Scanner. It learns from new CVEs, bug bounty data & intelligence gathered from pentest Astra security engineers do for companies in varied industries.

The “Vulnerabilities” section in Astra’s Vulnerability Scanners provides a detailed analysis of every single vulnerability discovered in the scan results:

  • Details of Vulnerability
  • Affected Components (of application or N/W)
  • Vulnerability Impact, Severity, CVSS Score and Potential Loss (in $)
  • Steps to Reproduce
  • Steps to fix / Suggested Fixes
  • Additional References

5. Use security audit tools for Blockchain and Smart Contracts

  • SWC-registry – It is a type of library for smart contract weakness and vulnerabilities
  • MythX – It is a smart contract security analysis API
  • Echidna – It is used for fuzzing/property-based testing of Ethereum smarts contracts
  • Manticore – It is a symbolic execution tool for smart contract analysis
  • Oyente – A static analysis tool for smart contract security
  • SmartCheck – Security analyzer
  • Octopus – It is a security analysis framework for the smart contract
  • Awesome Buggy ERC20 Tokens – A collection of vulnerabilities in ERC20 smart contracts with tokens affected

Professional Smart Contract Security Audit by Astra Security

Considering the more complex structure of blockchains and smart contracts can become ambiguous for many IT teams during the security audit or pentesting of their smart contracts. Further, the limited and distributed resources about the technology can get the IT teams stuck during the audit process due to insufficient knowledge for proper implementation – which ultimately leads to a waste of time and resources for your organization.

Hence, it is always best to take professional help from certified security auditors who can easily do the job for you so you focus on the business side.

Astra Security can help you get your smart contract or blockchain platform audit done without any hassle. The award winning Astra provides the most complete set of smart contracts security solutions and services. You also get a publicly verifiable VAPT certification from Astra that can help you build customer trust for your blockchain-based platform.

With Astra Security, you achieve every goal of your comprehensive security strategy for your blockchain platform – be it best practices to reduce risks against cyberattacks or building a rock-solid application for your customers.

Want to know more about Astra’s smart contract security audit solution and services? Schedule a call here to talk with our expert team in detail.


References:
https://ethereum.org/en/developers/docs/security/
https://consensys.github.io/smart-contract-best-practices/known_attacks/
https://github.com/crytic/building-secure-contracts/blob/master/development-guidelines/guidelines.md

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Kanishk Tagade

Kanishk Tagade is a Marketing Manager at Astra Security. Having a hawk-eyed view on the cybersecurity threat landscape, market-shifts, and hacktivism activities, Kanishk is a community member of the Nasscom and corporate contributor at many technology magazines and security awareness platforms. Editor-in-Chief at "QuickCyber.news", his work is published in more than 50+ news platforms. He is also a social micro-influencer for the latest cybersecurity defense mechanisms, Digital Transformation, Machine Learning, AI and IoT products.
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