How to Conduct a DApp Smart Contract Security Audit?

Today, decentralized applications run on blockchain-based platforms offer a variety of benefits to their users.

By removing the need for a centralized authority such as a bank or a government to verify transactions and manage digital assets, these applications cut out third parties like banks and government institutions that could be vulnerable to cyberattacks.

But, because dApps are still in their infancy and being developed with little or no security measures, there’s bound to be room for improvement regarding user experience, security risks, data privacy and transparency of fees.

This article will teach you how to conduct a dApp smart contract security audit.

But first, let’s explore what a dApp smart contract audit is and why dApp smart contract audit is important.

What is a DApp Smart Contract Audit?

A DApp Smart Contract Audit is a type of audit that is conducted to identify and assess the security of a DApp. A DApp Smart Contract Audit is similar to a security audit in that it is conducted to identify and assess the security of a DApp.

However, a DApp Smart Contract Audit differs from a security audit in that it is conducted to identify and assess the security of a DApp deployed on a public blockchain.

A DApp Smart Contract Audit is conducted by an independent party who has access to the source code of the DApp and access to the network on which the DApp has been deployed.

A DApp Smart Contract Audit is typically conducted in conjunction with an audit of the source code of the DApp and its deployment on a public blockchain.

A DApp Smart Contract Audit typically provides an overview of the security posture of the deployed DApp, including an assessment of its resilience to attack.

Why is a DApp Smart Contract Audit Important?

• Act as a security certificate for your investors

A security certificate is a document that a company or organization creates to prove that it is the owner of a specific asset.

The certificate can be used to prove ownership of an asset, such as a piece of real estate or a piece of software.

A security certificate can also prove that the company has the legal right to use the asset. In addition, a security certificate can be used to prove that the company has the financial ability to use the asset.

• Increased longevity

Audited applications are more secure because they’re more likely to be maintained by users with a vested interest in the app.

As a result, they’re more likely to be secure than unaudited apps. The most common reasons for unaudited apps not being maintained include lack of time, lack of motivation, and lack of technical skills. Audited apps can also be maintained by users with technical skills and a desire to help their users.

• Unsusceptible to non-functionality aka Zero Downtime

The application responsible for safely and securely handling your investors’ funds has to work 24/7 without fail, without any hiccups.

If any of the systems within the application is faulty, the whole process will be slow, complicated and likely to result in a failed audit. This is a huge plus for projects that deal with large volumes of funds.

• Optimized performance levels by up to 2x

DApps that have been audited have higher chances of accelerated performance levels. This is usually due to optimization of the code and detection of potential problems and issues by the blockchain engine. These changes can reach up to 2x if a third party performs the audit.

How to Conduct a DApp Smart Contract Audit – Everything You Need to Know

Step 1: Understanding the Project

The first step in any smart contract audit is to gain an understanding of the project. This is done through interviews, documentation analysis, and observation of the code in the project’s GitHub repository.

If the project is new, the audit team may conduct its first interview with the project’s developers. Since the code is the audit’s key evidence, it is crucial to understand the project’s architecture and the team’s cooperation.

If the project is ongoing, then the team leaders may conduct interviews with the lead developers to understand their personalities and the project’s evolution over time. 

Step 2: Setting up a Development Environment

The second phase of the audit is to set up a development environment. This is the environment that the team will work in during the audit. It may consist of a virtual private server (VPS) or a dedicated computer running on an actual server.

The team’s development environment should facilitate the audit process. This could mean having the victim’s address and public key ready to go, a fully-featured development environment, and the necessary tools to build, test and ensure that the code works as expected. 

Step 3: Access to the Code

Once the team has set up its development environment, the audit team heads straight to the code. It is a good idea to open the code in a code editor so the team can see the relevant lines as they read through the code. An ideal source for code editors is a code analysis tool such as Etherscan.

Step 4: Verified Scope of Audit

The final phase of the audit is to verify the scope of the audit. This is done by manually reviewing the code to ensure it meets the agreed-upon functional and technical requirements. While the team can perform this verification directly on the code, this is often too time-consuming and requires human judgment.

The team uses a code-signing package such as OpenSSL to sign the code for a more effective verification process digitally. This allows the team to more efficiently verify the digital signature and better understand the security of the code based on the provenance of the signed code. 

Step 5: Access to Functional and Technical Requirements

The team then moves on to the functional and technical requirements. These are often more complex to verify as they are linked to the project’s overall architecture.

These might include the project’s governance and management, data management, accounting, and code review.

During this phase, the team signs a non-disclosure agreement (NDA) to keep the terms of the agreement secret.

The team signs this agreement because it is required to reveal the relevant details of the project to any interested parties, such as potential investors, contractors, or vendors. 

Step 6: Access to Unit Tests

Finally, the team tests the code to ensure it works as expected. This is typically done manually by checking the code against documentation or other source code. If the code does not pass these checks, it may indicate a larger issue with the software implementation.

What to look for during a DApp Smart Contract Audit

Although smart contracts have gained popularity in cryptocurrency over the past few years, the term is not entirely accurate.

Smart contracts are digital currency that can be used to create and exchange assets, but they are not actual contracts.

Instead, smart contracts are computer codes used to carry out financial transactions between parties in the future.

One of the most important things to look for when evaluating a DApp security audit is whether there is someone on the team who knows what they are doing and will have the ability to respond to any issues quickly. That’s a big win because issues are much more likely to be found in a poorly written contract or a bug-ridden interface.

Another important aspect is transparency. Smart contracts are private and cannot be changed later. If something goes wrong, it will be very difficult for anyone to change it without everyone knowing about it first.

Finally, smart contracts should have some way of enforcing their terms. This could be via a token or conditions set on complex financial transactions.

Concluding thoughts

A dApp smart contract audit is important because it helps identify potential vulnerabilities and risks that could lead to downtime, hacking, or loss of funds. And most importantly, it helps investors be more confident in their investments.

A security certificate is a document a company or organization creates to prove ownership of a specific asset. A security certificate can also prove that the company has the legal right to use the asset. In addition, a security certificate can be used to prove that the company has the financial ability to use the asset.

In addition, audited applications are more likely to be secure because they’re more likely to be maintained by users with a vested interest in the app.

As a result, they’re more likely to be secure than unaudited apps. The most common reasons for unaudited apps not being maintained include lack of time, lack of motivation, and lack of technical skills. Audited DApps can also be maintained by users with technical skills and a desire to help their users.

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