Since the development of decentralized finance platforms and blockchain networks, cryptos have become one of the leading players in the digital market. As time passes, more and more people and businesses are getting interested in crypto investments, as it helps them to facilitate financial transactions more efficiently. Tokens and crypto-assets operate on the top of a blockchain network that works as a medium technology for building and executing decentralized apps and smart contracts. Moreover, they are an excellent option for fundraising and crowd sales.
And as crypto tokens use smart contracts for high-level functionality and integrity, the security of these contracts becomes a priority for crypto investors and stakeholders. Therefore, smart contract testing and evaluation come to light as it is the best way to audit coin components thoroughly and identify potential security vulnerabilities.
So, in this article, let’s discuss token audits, process methodologies, and their importance in digital ecosystem operations.
Coin Smart Contract Audit: Importance and Benefits
A smart contract audit is a comprehensive methodological analysis and examination of a smart contract’s code used to interact with blockchain networks or cryptocurrencies. Generally, security testing is performed by auditors and cybersecurity professionals to identify mistakes, errors, security vulnerabilities, and issues in the written code. As a result, they will thoroughly understand existing blockchain security problems and effectively solve them before entering the crypto market.
Such security checks are relatively complex, as smart contracts constantly interact with each other, and interactions with third-party force systems can lead to critical errors making the entire blockchain system vulnerable. Because of this, the auditing process can often be expanded to other related smart contracts involved in important transactions.
Along with identifying commonly known vulnerabilities, smart contract security audits also solve many other problems relating to the contract code functions and executing runtime. Here let’s review some significant benefits you will get while performing a smart contract audit for your crypto assets.
Avoid Costly Errors and Risks
Auditing and reviewing smart contracts code early in the development process’s initial stages helps ensure the crypto is secure and risk-free. In addition, it will help avoid future damages such as a hard fork, significant financial losses, or even legal charges in case of severe blockchain security incidents.
Prevent Security Threats and Attacks
Auditors and smart contract developers can review the code’s integrity and functions when writing and deploying it. Hence, they can check and identify even minor vulnerabilities in the current time and think of ways to fix them effectively.
Security Expert Review
During the smart contract audit, the team of auditors generally performs double-checks of your contract code to eliminate spurious results.
Regular Security Testing and Assessment
Due to regular smart contract audits, companies can easily ensure that their business operations and systems work without any disruption and bugs. In addition, constant blockchain security checkups can also improve the entire development environment.
Analytical Audit Report
Once the security audit is done, the project team can access a vulnerability report with an executive summary of current vulnerability details and remediation strategies.
Coin Audits: Process and Methodologies
Like any other blockchain security audit, the process and methodologies of smart contracts audits vary from one client to another, depending on the target project and its specifics. However, there is still a subsequent order of steps that almost all auditors follow.
#1 Collecting The Specification Terms
The first step in executing a smart contract audit is gathering all necessary condition terms and code specifications. The required information includes the technical documentation of the code, blockchain protocols, records of critical financial transactions, and auditing goals. This information helps the project team properly understand the basics of the written code and draw an initial report of further steps and audit methodologies based on the scope and size of target token projects.
In most cases, the client will be given a request form to fill in all the necessary details related to the project.
#2 Manual Code Analysis
After getting all the required technical documents and code details, the team moves on to the second part of the audit process and runs multiple tests for manual review. During this stage, the security professionals check each line of the crypto’s smart contract code for possible vulnerabilities and errors and then verify whether it follows the intended behavior. In this phase, auditors can also perform threat modeling and run several automated tools for additional security review.
#3 Comprehensive Testing
Once the manual code review is completed, the security team can implement the test suite, including unit test cases and integration tests. The main goal of unit testing is to properly check the functions of the code and ensure it executes correctly without errors and disruptions. Moreover, through unit tests, security experts can detect critical vulnerabilities leading to a reentrancy attack and external call.
#4 Final Report
The final stage of any smart contract security audit covers detailed reporting. Audit reports include the results of the performed audit, a list of found vulnerabilities, and appropriate recommendations on how to fix and solve them. Furthermore, they also provide remediation options and helpful resources to minimize the possible security risks.
The final cost of smart contract audits is not fixed. It mainly depends on various contributing factors, including the project’s scope, the complexity of the code, audit goals and requirements, choice of tools and methodologies, etc. For instance, complicated DeFi projects request a more detailed approach and take a longer time compared to simple auditing. However, an estimated average price for a standard smart contract audit ranges from $5000 to $30000.
Generally, clients who want to audit their token projects firstly quote request forms from the auditing company to know the details and specifics of the entire auditing. Later, when all conditions are set, the auditing team can begin the token audit. The whole token auditing process is carried out through multiple steps and stages, covering different tests, blockchain security tools, analysis, etc. Here, let’s look through the key steps in detail.
1. Information Gathering: In this stage, the auditors access all technical documentation, including Solidity code deployment and technology specifics, description of blockchain protocols, and project goals and requirements.
2. Blockchain Security Assessment: In this phase, the team looks into your token’s smart contract business logic to assess the code’s risk coverage and other security aspects. Comprehensive assessments and evaluations of crypto assets enable auditors to identify all weak spots and bugs and secure the entire blockchain system.
3. Review: The token’s smart contracts reviewing includes manual and automatic analysis of the code to ensure its functions accuracy and make improvements if needed. Code reviews are done through different tests, tools, and techniques.
4. Reporting: At the end of the audit, users will be provided with a detailed audit report reflecting the results and outcomes of the blockchain audit. The report covers the identified security issues and recommendations for resolving them.
IRS tax audits are one of the primary concerns of all crypto investors and users. If prepared carefully, you can easily pass this audit. However, in some cases, token audits can end with unpleasant scenarios and lead to different legal charges. The two main reasons that can trigger your crypto audit are:
– Not reporting all records of your crypto tax returns.
– Mismatch of your registered records with the original ones.