You’ve probably arrived here because you’re about to launch your Ethereum blockchain application. The craze for smart contracts is a wise move. Many people want them nowadays, but few value quality over quantity and patience over audacity. The rest makes costly errors. How much does it cost? Due to smart contract errors, nearly $2 billion was lost on decentralized finance platforms in 2021 alone. This article will discuss smart contract vulnerabilities and how to improve their security. Finally, you don’t want to be outwitted, do you?
Vulnerable Smart Contracts
Let us look into one of the most heinous smart contracts exploits ever committed. On November 8, 2017, a man going by the alias Devops199 created a Github issue for Parity Technologies, a blockchain company. The case was dubbed “anyone can cancel your contract.”
Devops199 discovered a flaw in a multi-signature contract that many people used to store their Ethereum securely. Because of this bug, or a smart contract vulnerability, he could have become the contract’s owner. Then everything fell apart.
The contract was terminated by removing the function that allowed Ethereum owners to transfer assets. He appears to have permanently secured the investment in the agreement, rendering it ineffective. What was the value of Ethereum in these contracts? Estimates range from $150 million to $300 million.
Unfortunately, this was not an isolated incident. We hear about similar incidents involving DeFi projects several times per month.
“Why does this happen?” you may wonder. To gain a better understanding, we must dig deeper into smart contracts.
Ethereum Smart Contracts in Historical Perspective
What exactly are Smart Contracts?
Smart contracts are agreements between two parties that do not require the trust of a third party. These contracts can uniquely communicate ether to and from other contracts in addition to transferring ether to and from users and other contracts.
Ethereum is the most popular smart contract architecture, representing smart contracts as computer programs. The Ethereum consensus protocol, which governs how nodes in the peer-to-peer network expand the blockchain, aims to ensure contract execution.
To add a new data block to the blockchain, nodes must enter a “lottery,” with the likelihood of winning proportional to their computational power. Even if a malicious node wins the mining game and attempts to append a block with incorrect contract executions, the block will eventually be removed from the blockchain unless the malicious node controls more than 51% of the network’s mining capacity.
Smart Contract Programming
Contracts are primarily composed of fields and functions. Sending a valid transaction to the Ethereum nodes can invoke a function. The transaction must include the miners’ execution fee and an optional ether transfer from the caller to the contract.
The contract can accept ether from other users and send it to them using the transfer function. The hashtable outflow keeps track of all the addresses to which it sends money and associates the total amount transferred with each one. The contract stores all ether received. Its value is immediately added to the balance sheet.
The Test of Solidity
There are a variety of reasons why Ethereum DeFi smart contract development is particularly prone to failure. Many of them are associated with Solidity, Ethereum’s high-level programming language. It is used by the Ethereum Virtual Machine (EVM), which makes it easier to implement most smart contracts.
Smart Contract Security
It is safe to say that the proper execution of Ethereum smart contracts is required for their effectiveness. However, correct executions alone are insufficient to ensure smart contract security. As a result, Ethereum has several security flaws.
These flaws were exploited in attacks on Ethereum contracts, resulting in financial losses. As previously stated, Solidity is to blame for some of the issues affecting smart contract security, but the list of challenges does not stop there.
Ethereum Smart Contract Vulnerabilities Exist
As previously stated, Solidity is to blame for some of the issues affecting smart contract security, but the list of challenges does not stop there. This is due to how the VM handles state and external calls.
Let’s take a closer look at the Ethereum smart contract security flaws.
One of the most damaging attack strategies against smart contracts is reentrancy. This attack method can destroy the agreement or steal sensitive information.
Reentrancy can occur when a function calls another contract via an outer call. An attacker can exploit this flaw by executing a recursive callback of the primary process, resulting in a loop that is repeated multiple times.
An error in the smart contract code can lead to the exploitation of an application vulnerability. This kind of abuse is most common in smart contracts. It occurs when decentralized application developers fail to identify code flaws. By taking advantage of simple programming errors, attackers can deplete the contract wallet of all funds.
Malicious behavior includes the distribution of malware to deceive consumers. This is typically done over the Internet to compromise a user’s identity or commit fraud using malware or viruses. Malicious attacks may take the form of a wallet email requesting that the account be synchronized with a recently forked network.
Any website that asks you to link your wallet and send money to an unknown location is another possibility. An attacker may be able to deplete a user’s wallet by using malicious attacks completely.
Inadequacies in the Protocol
To keep the network running, the blockchain includes a consensus protocol. Exploits based on poor consensus have recently become more common, even though attacks based on flaws in consensus protocols can be quite costly.
On the other hand, successful attacks can remove blocks from the chain, completely destroy a blockchain, or seize complete control over the price of a coin. Weak protocols lead to attack strategies such as 51% attack, egocentric mining, and 34% assault.
The Date and Time
Another flaw that shady miners can exploit is timestamp dependency. To gain an advantage, a miner can change the timestamp by a few seconds. The problem with timestamp dependencies stems from a misinterpretation of timekeeping. It allows the Ethereum network to be decoupled from the globally synchronized clock.
How to Improve Smart Contract Security
Smart contract security is based on the same coding, testing, and assurance principles as any other program. Here are some tips for making your smart contract more secure.
Security audits and testing
You will not have access to all information while developing your blockchain software. As a result, preliminary testing is critical. It is in your best interests to take advantage of all available testing resources. You should start by testing the contract’s basic functionality and launching a smart contract on a test network. These procedures can significantly improve your chances of discovering critical bugs in your code while they are still fixable.
Auditing the security of your smart contract is yet another necessary step in ensuring its safety. This is because expert auditors are more likely to identify potential flaws in your code and provide helpful suggestions for improving and optimizing it.
Smart Contract Creators
Although the Internet is full of valuable tools for detecting potential flaws in your code, they cannot replace a competent and experienced blockchain development team.
Even if your smart contract appears bug-free and secure, hackers will always be able to exploit potential security flaws. They can corrupt the code of a smart contract or an entire blockchain platform, resulting in the loss of thousands or millions of dollars in cryptocurrency.
Collaboration with a seasoned DeFi Development services provider that has completed numerous projects will assist you in navigating the development process, identifying potential roadblocks, and launching the entire palette of decentralized applications that will establish your reputation.