Explain the concept of smart contracts and their types?
When the predetermined conditions are met, programs stored on blockchain start running; then they are called smart contracts. Smart Contract is a type of review check that is used to automate the execution of the project and save participants from any loss. The smart contract aims to facilitate business and trade between identified parties with and without the help of a middleman. There are mainly three types of smart contracts. They include:
Smart legal contract:
It is a contract that is based on legal agreement and involves mutual asset, valid offer, acceptance, consideration, and legality. Under this contract, parties are accountable to each other till the time the contract attains its maturity. Both parties are duty-bound to fulfill their obligations. Any non-fulfillment of obligations may result in a breach of contract plus legal action can be taken against the unlawful party.
Application logic contracts:
ALC is a type of smart contract that works under a managing program. It requires an application code for making contracts with other blockchain contracts. Through blockchain technology, parties can communicate over several devices. These contracts involve some financial purposes such as investing, trading, lending, and borrowing.
Decentralised autonomous organizations:
Under the Decentralised autonomous organization, contracts are between groups of people who have agreed to certain rules of common purpose. All the rules of this contract are written into the code of the organisation with the help of smart contracts and their algorithms. It is the safest way to collaborate with rank strangers on internet as well as commit funds to a specific cause. It is also known as a decentralised autonomous corporation.
What then is a smart contract security audit?
In a decentralized finance ecosystem, almost all the projects we invest in are blockchain-based, so half of the results are based on the smart contract code review. In simple language, a smart contract security audit follows the same method as other company audits. There is an audit team established and smart contracts are given for initial analysis. Afterward, any pros and cons of the smart contract are displayed by the audit team and then changes are adopted according to the issues found. The audit team gives the final result at the end, coupled with the new changes and some outstanding errors. Smart contract security audits are conducted when investors invest in new decentralised finance platforms.
What are the different methods of running a smart contract audit?
The main aim of a smart contract audit is to find out the flaws and vulnerabilities with the help of code analysis. Several audit tools are used in the audit processes, which are either manual or automated. The following audit methods of smart contract security are discussed below:
Using of Gas Gauge tool:
It is the tool used for the audit of smart contracts and mainly involves the analysis of three stages. The first analysis is a static analysis that only detects loopholes in the smart contract. The second analysis is a white box fuzzer that detects those public variables which affect a loop inside the function. The third last stage is a static analysis which analyzes the static and dynamic pros and cons of the smart contract and issues a final statement.
Checking of contract vulnerabilities:
Under this method of the smart security audit, advanced techniques and strategies are used to check the contract security vulnerabilities. When smart contracts try to contract with other external contracts they detect and resolve that issue with a mutual settlement. The basic three steps are performed in this method for eg., solving reentrancy issues, integer with overflows and underflows, and providing front running opportunities.
Look over platform security flaws:
The audits are conducted to look at the network hosting of the contract whether it is centralised or decentralised based. Smart contracts should be secured with various securities so that DDoS attacks don’t affect them. This method is used to look over the platform security flaws rather than connectivity flaws.
A smart contract security audit is necessary nowadays to shield your contracts from outside attacks. The audit is done by others but it is essential to have them re-checked by the actual contractors, who check the real flaws in the project. Through the audit, both parties will be able to understand the smart contracts more deeply. It is essential for all the people who want to invest in smart contracts to assess its audit measures so that their dealings are safe and secure.