A Smart Contract Security Audit Can Save A Company From Major Headaches

Smart contracts are a blockchain solution that is becoming increasingly useful and valuable in various industries. The number of deployments continues to grow, even with the fluctuations of the cryptocurrency market. However, many entrepreneurs and startups make the critical mistake of launching a business based on a smart contract without conducting a security audit first. Technical bugs and conceptual errors can severely harm a future company, as once the code is deployed, there is no way to undo it. In this article, we will examine the main trends in the smart contract ecosystem, as well as the frequent issues that a comprehensive security audit can help prevent.

Alejandro Giuffrida

March 14, 2023

Key Points

The Exponential Growth of Smart Contracts and their Diverse Range of Applications

According to their latest report, in the fourth quarter, Alchemy recorded a 293% increase in the number of smart contracts deployed on the Ethereum network compared to the fourth quarter of 2021. Millions of newcontracts are being deployed across different networks every month, which is a lot, but it's likely to increase even more in the future.

We can draw at least two significant conclusions from this information:

a) Smart contracts have their own pace, independent of the ups and downs of the cryptocurrency market. This is evident because despite 2022 being a challenging year for cryptocurrencies, it was a record year for smart contracts.

b) The growth of smart contracts is exponential and we are just witnessing the early stages of the benefits and applications of this technology.

DeFi platforms, art, wine production, luxury goods, pharmaceutical drugs, medical records, university degrees… The diverse range of emerging uses for smartcontracts based on blockchain is truly exhilarating. Companies are beginning to grasp the advantages, and governments are also taking notice. In many instances, utilizing a blockchain solution provides transparency, security, and cost savings in the long run.

Securing Smart Contracts: Preventing Risks and Ensuring Better Outcomes

Once a smart contract is deployed, it cannot be altered. While it can be replaced, the original version will remain forever. This is one of the most prevalent issues we currently encountered in our process at Rather Labs, during the current surge in blockchain applications.

Therefore, we strongly recommend that our clients (and everyone!) conduct a "Smart Contract Security Audit" in order to assess the security of their code and architecture, and prevent potential vulnerabilities and risks in the future.

In many cases, companies or entrepreneurs deploy smart contracts on their own to run business initiatives without anticipating the potential volume and scalability in the real market. If the code has not undergone a professional audit beforehand, the risk of missing out on a big opportunity is high (very high indeed).

A Security Audit helps ensure that the contract operates as intended and protects users from security threats and financial losses. During this process, we identify and resolve any issues in our clients' contracts before they are deployed on a blockchain network. We also examine contracts that have already been deployed but are experiencing bugs or limitations.

What sets Rather Labs apart as a strong option for security audits is our extensive experience in developing smart contracts with various functions and across different networks. This enables us to quickly identify any weaknesses in code and promote best practices to ensure better outcomes in the future.

Bugs And Solutions

The two most frequent mistakes made when writing a smart contract are related to its governance and the limitations in making improvements without impacting its users. Let's delve into each point in more detail.

In terms of governance, many contracts often have too much reliance on a single address, which is designated as the "owner." However, this address may not always correspond to the actual owner of the initiative. For example, there have been instances of NFT collections being launched worth hundreds of thousands of dollars, where the issuer did not have full control of the contract. To mitigate this risk, it is crucial to have its complete control and a backup plan already prepared in case there are issues with the address, and to ensure that only the client has access to these types of functions. This is not a classic code bug, but rather a concern due to the delicate nature of the original setup.

In the second of the two most common mistakes, the DeFi sector provides a clear example to better understand it.

Many times, a financial platform wants to implement improvements, offer new services to its users, or correct a problem. Naturally, a new version of the smart contract can be implemented, but this often entails a significant migrationthat can be quite disruptive for clients. There are even those who use the platform infrequently and having to migrate may mean discontinuing use of the app.

To avoid disruptive migrations, a thorough security audit would recommend the use of proxies in complex contracts. This decouples the users' information from the contract that contains the logic of its operation. In this way, if a bug is discovered, it is possible to modify the smart contract behind it, which houses the operational circuit (while preserving the same interface), and redirect the proxy to the new code.

Cases like these two are not uncommon. Our mission at Rather Labs is to prevent a small bad decision made at the start of a project from leading to serious problems in the future. Get in touch with us for further info!