Blockchain Code Audit And Its Importance

How to Perform a Blockchain Audit?

Estimated read time: 5 minutes

Planning to undertake a blockchain audit and wondering how important it is to get right? You have come to the right place.

The importance of code if you want your blockchain application to shine cannot be understated.

Blockchain audit: What, why, and how

Manual traditional audit of code is important in blockchain development projects, and let’s now understand more about this.

1. What is a blockchain code audit?

Put simply, a blockchain audit is a structured and systematic code review of a blockchain development project, and it’s done manually. It might use static code analysis tools, however, the main thrust is on experienced blockchain developers to review the code to find bugs.

2. Why your project plan must include a blockchain code audit

As observations from experts show, Ethereum smart contracts have a 3% failure rate. This is indeed a challenge, however, smart contract bugs can be prevented.

Blockchain/crypto experts have noted that it’s eminently possible to detect smart contract bugs early and prevent them from reaching the production environment.

As a responsible entrepreneur or business leader planning to launch a blockchain project, you should include a blockchain code audit in your project plan. Read more about the observations of experts in “Blockchain smart contracts: more trouble than they are worth?”.

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3. How to conduct a blockchain audit?

Let’s understand the steps involved in a blockchain audit, which are as follows:

3a. Locking down the source code

When you undertake a smart contract audit, you first need to lock down the version of the source code. This ensures transparency in the audit process.

It also helps you to differentiate the version already audited vs any further changes you make to the code. You should document the version number, commit time-stamp, etc. for the version you are auditing.

3b. Understanding the blockchain project

You need to engage an external team for auditing your blockchain project. Such an external team needs to understand the project, its use case, its architecture, etc. You should plan for sufficient time for this in your project plan.

3c. Reviewing the project documentation

The external audit team you engage needs to review various documents like the business requirements, architectural decisions, technical design, etc. This team should also review the test cases and test plans thoroughly.

3d. Preliminary code review

A blockchain code audit team needs to review the code multiple times, and a preliminary code review is the first such instance. The entire audit team needs to read the complete source code repository.

During this exercise, they understand how the development team has implemented the design. Read more about this in “How to audit a smart contract? – A guide”.

3e. Static code analysis

The audit team could use available tools for static code analysis. As I have noted earlier, there is limited tooling support for this at this point since blockchain is still a new technology.

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3f. Code quality analysis

An independent audit team reviews whether the development team has adhered to the coding best practices. This review focuses on the structure of the code, the naming conventions used for the variables, comments in the code, etc. The development team should avoid using replicated code, and the audit team checks for this too.

3g. Analyzing the presence of known vulnerabilities

The independent audit team should scan the code thoroughly to find whether there are known vulnerabilities. Examples of known vulnerabilities are as follows:

  • Reentrancy;
  • Shadowing of variables;
  • Storage pointers that can be exploited;
  • Overflows and under-flows;
  • Bugs that could enable hackers to launch Denial-of-Service (DoS) attacks;
  • Incorrect cryptographic signature validation;
  • Generating random numbers in an insecure manner;
  • Timestamp dependencies;
  • Incorrect assumptions were made for ordering blockchain transactions.

This is not an exhaustive list of such vulnerabilities, and you can read the “Decentralized Application Security Project (or DASP) Top 10 of 2018” for more insights.

3h. Functionality analysis

An independent blockchain code audit team should check whether the code in question will deliver the desired functionalities. They need to document all observations.

3i. Reporting and tracking

At the end of the review, the audit team should prepare a detailed report. You need to review this and work with your development team to address the issues, subsequently, you need to document the closure of the issues.

Addressing bugs in smart contracts and reviewing them again follow an iterative process. You need to ensure that all such iterations are fully documented.

Wondering how to go about a blockchain code audit for your project?

A blockchain code audit is essential for your blockchain project. As I have explained, your team must thoroughly test the smart contracts, however, that is not sufficient.

Testing of smart contracts is subject to the same limitations of software testing in general, such as it’s never possible to test a program completely.

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Moreover, Every software testing project contends with schedule and budget constraints, and it’s the same with testing smart contracts. You might not be able to test every path, moreover, it’s not possible to test every valid or invalid input.

Given that there are a limited number of blockchain smart contract verification tools, you have a significant dependence on a structured code audit quality through internal and external auditors. It can be hard to find expert audit firms for such an extensive audit process though.

You should look for blockchain development experts with a deep understanding and expertise in blockchain code audit processes. Our guide “How to find the best software development company?” can help you find such an expert audit firm.

If you are still looking for experienced blockchain developers to help you audit blockchain applications, DevTeam.Space can help you. Write to us your initial blockchain audit requirements via this form and one of our competent managers will link you with the right blockchain code developers and auditors.

Frequently Asked Questions

1. What is blockchain technology?

Blockchain peer-to-peer networks consist of multiple nodes that keep a record of all digital asset transactions on a digital ledger. Hence, called a transparent technology. The blockchain ledger is decentralized. A distributed ledger offers immutability, secure storage of stored data, and secure management for recorded transactions. Smart contracts handle the agreements for any service such as the preparation of financial statements, financial reporting, supply chain operations, etc. via digital assets among multiple parties on the same blockchain. There are private and public blockchain networks.

2. How can I prevent smart contract bugs from going into the blockchain production environment?

As with any other software development project, you would need to have robust verification and validation processes. These should include the following:
Verification: Reviews, walkthroughs, and inspections of plans, requirements, design, code, test cases, etc.
Validation: Testing the application system.

3. Is there a smart contract testing tool available?

Blockchain technology is new, and the tooling support in this area is currently limited.
VeriSol from Microsoft Research is one such verification tool for smart contracts. The name VeriSol stands for “Verifier for Solidity”, and it works with Solidity, the popular language for developing Ethereum smart contracts.


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