Each time I read about a crypto hack on the internet, I usually heave a sigh of disappointment. I always ask myself whether there will ever be an end to the alarming rate of cyber attacks on blockchain protocols. For every crypto hack that has occurred, it feels like the cryptocurrency industry has taken ten steps backward, undermining its progress and worsening the industry’s image problem.
Apparently, crypto hacks happen not because there are no effective cyber security measures in place but because they are either not enough or they are currently outpaced. Developing a superior cybersecurity technology must be seen as a race to beat hackers to their own game, and further improvements are required to match their tactics for tactics, so much so that cybersecurity technologies must be ten steps ahead of cyber threats.
In this article, I will be delving into the efficacy of smart contract audits, highlighting the significance of a routine audit and the convergence of various approaches that are tailored towards a safer blockchain ecosystem.
What Are Smart Contracts?
Smart contracts are pieces of self-executing computer programs on a blockchain. They are designed to function when a particular set of conditions are fulfilled (i.e., minting an NFT), and the ultimate purpose they serve is to cut off intermediaries.
It is hard to imagine today’s world of decentralized applications(DApps) without its functionalities. However, deploying it on a blockchain protocol comes with potential risks. In other words, they are vulnerable to cyber attacks such as DOS attacks, phishing, flash loan attacks, and rentrancy attacks.
One of the earliest events that proved that blockchain technology is not the gold standard for cybersecurity involved a smart contract. Many people remember this event as the infamous DAO hack, which happened in 2016 after hackers exploited a flaw in the code and stole over $50 million.
The most recent example of this type of exploit is the Normie memecoin hack, which took place on the 26th of May 2024. This exploit not only resulted in the loss of over $800,000 but also saw the market capitalization of the memecoin slump to $35,000 from $41 million in a matter of days.
Why Do Smart Contract Hacks Occur?
There are bad actors in every dark corner of the web. Smart contract hacks occur because hackers are able to identify and exploit the vulnerabilities of a smart contract. In most cases, they are written by humans, making them prone to errors that hackers usually exploit.
In another instance, hackers do this by tricking unsuspecting users into interacting with a malicious smart contract in order to steal their funds.
Combating Smart Contract Hacks
Blockchain protocols continue to suffer heavy financial loss due to the recurring exploit. To address this menace, a regular smart contract audit is usually recommended by cyber security experts.
While this security measure might offer a semblance of efficacy, obtaining an audit certificate has never turned out to be the most assuring safety measure. As a matter of fact, a one-off audit is never enough because experience has shown that it must be carried out from time to time.
Furthermore, the DeFi landscape has witnessed significant advances in blockchain security with the emergence of AI, so much so that AI is increasingly becoming a viable tool in the detection of anomalies.
Leveraging AI can further enhance the ability of professional auditors to carry out a thorough risk assessment because it raises the bar for audit technology and reduces the dependence on the traditional manual process.
The Significance of Smart Contract Audit
Auditing smart contracts is the process of running checks on the code to discover potential security flaws. While it is not the ultimate measure, it has grown in importance over the years, especially with the rise of professional audit firms.
Regularly checking for vulnerability is an industry-standard procedure justified by collective wisdom: prevention is better than cure. It is also a reminder that cyber threats are always lurking around the corner. Most importantly, there is a need for blockchain protocols to diversify their cybersecurity strategies so that a regular audit is combined with other evolving techniques, such as artificial intelligence(AI).
Commenting on the importance of a regular smart contract auditing UBET Sports CEO Daniel Jiwoong. Im said:
“Smart contract auditing is essential for platform like UBET Sports operating in the decentralized finance (DeFi) space. These audits identify and mitigate security vulnerabilities that could be exploited by malicious actors, safeguarding user assets and maintaining the platform’s integrity. Regular audits also build trust and confidence among users, reassuring them that the platform has been rigorously tested and verified by independent experts.”
“Recently, UBET Sports underwent three comprehensive smart contract audits, demonstrating its commitment to security and reliability. The first audit coincided with the launch of UBET Sports’ decentralized exchange (DEX) for sports betting, establishing a secure foundation. Subsequent audits focused on enhancing the Automated Market Maker (AMM) to improve slippage, optimizing gas fees, improving push settlements, and structuring revenue-sharing mechanisms for liquidity provision, ”he added.
Is a routine smart contract audit worth it?
“Building an on-chain product presents challenges, such as the need for audits before each release, preventing continuous integration and deployment. Despite these challenges and the high costs associated with multiple audits, we prioritized security to protect its users. With two more smart contract updates planned this year, we continue to make steady progress in the SportiFi space, merging sports and DeFi” Daniel further said.
Conclusion
Billions of dollars have been lost over the years to crypto hacks perpetrated by bad actors. Smart contract vulnerability can give rise to a potential hack, which can, in turn, undermine a blockchain protocol and drain the funds of its users.
Promoting a secure blockchain ecosystem has been at the heart of every cybersecurity measure, like smart contract audits that are designed to combat the incidence of cyber-attacks.
A smart contract audit, which typically involves a detailed examination of a protocol’s codebase, has been recognized as one of the standard techniques for combating potential crypto hacks. It has increasingly become a significant practice in blockchain security with the emergence of professional audit firms and sophisticated tools.