Similar to how web 3.0 has become the new Internet, DeFi is on its way to becoming the new financial system. Consequently, DeFi presents its risks, including smart contract risk. Audits of DeFi projects’ smart contracts could have prevented this circumstance.
Perform a DeFi audit if you want to ensure the security and integrity of blockchain-based projects for your users. Financial institutions should place a premium on protecting their customers’ personal and financial information when conducting business online. For users to have faith in these services, their source code must be flawless and exceed stringent safety standards.
Businesses use DeFi Smart Contract Audit to ensure the error-free deployment of their code. As a means of assessing the investment potential of cryptocurrencies, investors are keenly interested in the verification results of smart contracts. Let’s gain a thorough understanding of this matter.
What is Smart Contract Audit by DeFi?
DeFi, or Decentralized Finance, refers to many cryptocurrencies and blockchain-based financial applications designed to supplant traditional financial intermediaries. Before deploying your code to the mainnet, audits or formal verifications are urgently required due to the alarmingly high number of industry hacks and frauds. Because the decentralized financial system relies on smart contracts to operate automatically, any flaws in its code could jeopardize the system’s smooth operation.
A DeFi safety audit is a thorough examination of the code performed by auditors to prevent this from occurring. This audit is conducted by independent auditors, ensuring a fair evaluation of the code.
How does the DeFi Smart Contract Audit function?
Auditors inspect the documentation, website, and software repository for flaws in the code or problems with the implemented smart contracts. The auditing firm provides a summary and report containing a comprehensive examination of the project’s security and compliance with the whitepaper. For DeFi projects, the auditing process for smart contracts consists of multiple phases:
Project Evaluation
Examining the white/yellow paper of the DeFi software can reveal the business logic and evaluate the risk coverage and security properties.
Automation of Code Validation
Typically used in conjunction with automated programs that scan source code for known vulnerabilities.
Examine Manual Code
To ensure the code is secure, specialists conduct a series of tests to identify any significant vulnerabilities.
Prepare a Comprehensive Audit Report
This phase concludes with an in-depth examination of the smart contract’s flaws. It contains recommendations for mitigating the threat.
If these steps are taken to conduct a thorough audit, the integrity of your project will be ensured before its launch.
How Does Auditing Smart Contracts Benefit DeFi Projects?
A token audit is required to safeguard investors’ funds and ensure the project’s long-term viability. Millions of dollars can be saved by ensuring the safety of your project before production.
Your blockchain initiatives will benefit from audits of smart contracts conducted by highly seasoned experts utilizing automated technologies in the following ways:
- Ensure that the code and white/yellow paper are compatible.
- Avoid being compromised by protecting the assets.
- Assure the integrity of the project
Types of Problems Addressed by the DeFi Smart Contract Audit
Initiating a DeFi Smart Contract Audit ensures that the audit is more comprehensive than simply identifying and fixing code flaws. Other tests are conducted to ensure that the smart contract code is not susceptible to attacks such as flash loan attacks and others. In contrast, the majority of audit work focuses on identifying security vulnerabilities. First, let’s examine some of the most common flaws:
Independent Execution
The fallback feature is a characteristic of smart contracts. If this function is accidentally called, the indirect execution occurs. The fallback function can be invoked in multiple ways. Calling the ABI function of another contract, depositing to another contract that could generate a fallback, or a developer making an error in declaring the interface of a called contract is all examples.
Re-Entry Problem
Typically, when a smart contract calls another smart contract, it refers to an external contract. Nonetheless, the external contract may be invoked recursively before resolving any effects. It can then interact with the smart contract in ways that pose a security risk.
Integers that are Overflowing or Underflowing
Multiple instances of this type of coding error exist. At each stage of a calculation, operation results are stored in operands. Erroneous code execution can result from an integer overflow error, which occurs when the result’s decimal places exceed those of the operand.
Stay in the Lead
Hackers can exploit a poorly written smart contract code to reveal the details of token purchases and sales. The dissemination of this information can then affect these transactions.
In addition to searching for bugs in the code, the DeFi Smart Contract Development aims to increase the overall efficiency of the contract. Consequently, smart contract audit reports include audits of the following:
Effective Gas Rates
Gas fees are incurred each time a smart contract code is executed. Consequently, the smart contract audit reports can aid developers in optimizing their smart contracts by identifying inefficient actions or potential failure points that may result in higher gas costs.
Platform Vulnerabilities
An smart contract audit examines the platforms or APIs that use the smart contract in addition to the code. Even if the contract itself is impenetrable, the API or platform with which the contract communicates may render it vulnerable to attack.
Audit Demand for DeFi Smart Contracts Is Growing
Audit services are in high demand in the DeFi industry as the market expands. Demand for smart contract audits has skyrocketed as the value of the decentralized sector has skyrocketed since the recent popularity surge of DeFi.
Before the launch of a new platform, audit firms are inundated with requests from projects seeking to address vulnerabilities and flaws. Large security firms are compelled to abandon projects due to the high number of applicants. The market eventually reaches a point where it can no longer support itself.
In the ever-expanding field of auditing solutions, organizations must choose auditors with the requisite experience and credentials. A DeFi audit is the first step in ensuring the security of smart contracts. As a result, audited solutions may soon become the next big thing because they will be easier to insure.
Conclusion
Multiple high-profile projects have sustained substantial financial losses, necessitating a comprehensive audit of smart contracts. Even if your smart contract is audited, you cannot be sure that it will always be safe from new threats. The development of DeFi influences the evolution of the audit rules. In certain circumstances, relying on a DeFi token development company may be the best option, as they are always current on the latest industry developments. Suffescom Solutions can assist you with auditing your DeFi project using their superior smart contract services. Therefore, conducting regular audits should be your top priority.
