Smart Contracts: The Complete Details

Want to know about Smart Contracts? Here are the complete details about Smart Contracts, list of Cryptocurrencies with smart contract, Smart contract security and smart contract security audit.

Today, no one requires an introduction to blockchain technology and the benefits reaped from it throughout various industries. Because of this technology you can buy Bitcoin with debit card and other cyptocurrencies very easily. However, as the uses of the technology move quickly, the security aspect may have been left aside. This is also due to the common misconception that anything based on blockchain technology is inherently safe. While the blockchain technology powering fields like cryptocurrencies (Bitcoin, Ethereum, or Litecoin) has immense security, applications that interact with or run on the blockchain are not guaranteed safety.

Here, applications that use blockchain technology do so through smart contracts, which are programs stored on the blockchain and run only under predetermined conditions. Their specialty is the automation of commands that execute with no time loss or the need for intermediaries, adhering to the main principles of blockchain technology itself. The vulnerability of smart contracts, therefore, lies in their coding – bugs, misconfigurations, or other flaws. This is where smart contract security audits step in.

Smart Contracts Expained

Smart Contracts is a software program that combines the information of digital transactions as layers that are done on a blockchain. This program simplifies any complex transactions by issuing digital tokens for every product or service. Smart contracts can also be expressed in another way as it is similar to the token of agreement between the two parties between whom the deal is happening. Both the parties or groups are responsible for their activities regarding the transactions.

What is Smart Contract Blockchain

Blockchain is a digital network that was build and continuing by distributed computer systems working on software. It started maintaining digital and distributed ledgers to track every transaction related to cryptocurrencies. These blockchains have their own dedicated networks to utilize the digital tokens as a replica of transferring the value of transactions and this is the main reason for the drastic growth of cryptocurrencies.

Moreover, these blockchains are independent and not controlled by the banks. They aim in processing the information at a faster rate than the traditional way of registering the information.

Do Smart Contracts need Blockchain

The need for Blockchains is very high for smart contracts as Blockchain helps the smart contracts to verify, validate, capture, and enforce agreed terms between the parties. Without using the central entity and external enforcement, smart contracts on blockchain make the transactions and agreements among the buyers and sellers. The transactions are completely transparent and traceable.

How does Smart Contract Work

The smart contract is a software program used to simplify and eradicate the traditional way to transactions and ledgers with the automated digital transactions. Business groups collaborate with the developers and explain their requirements to attain the smart contract with desired behavior is the first step in the process of creating a smart contract. Payment Authorization, Shipment received, or a utility meter reading threshold are the simple conditions of a Smart Contract.

Smart contracts are executed automatically after meeting the requirements/conditions of the agreement between the business groups. Moreover, there won’t be any kind of third party like a bank, broker. Only the transactions will be between the two business parties only.

What is an Example of Smart Contract

The smart contract is widely used in simplifying complex tasks and transactions by converting them into digital code. This smart contract is also used in improving the election system. This is one of the best examples of a Smart Contract. With the smart contract blockchain, the voting process will be done safely and securely through digital means. Along with the conducting of elections, counting and validating the results is also done at a faster rate with higher accuracy. The Smart contract prevents casting multiple votes by checking the voter identities.

Are Smart Contracts Safe?

Smart Contracts follows the security concepts just similar to other security products. The security system of smart contacts is developed with the sequence of coding, testing, and modifying. Smart contracts employ the best programmers to write the code to protect themselves from attacks. Testing of the written code is done by well-experienced companies like CertiK.

As smart contracts use all the protective measures to develop very powerful security, your data of transactions will be stored securely and smart contracts are very safe to consider.

What are the Disadvantages of Smart Contracts

Along with the positives, there are few negatives for Smart Contracts. Some of the disadvantages are listed below.

• Vague Terms
• Third Party
• Possibility of loopholes
• Difficult to change

Top 10 Cryptocurrencies with Smart Contracts

Here are the Top 10 Smart Contract Cryptocurrency listed below.

• Ethereum (ETH)
• Solana (SOL)
• Polkadot (DOT)
• Ergo (ERG)
• Algorand (ALGO)
• Cardano (ADA)
• Avalanche (AVAX)
• Chainlink (LINK)
• Stellar (XLM)
• Ethereum Classic (ETC)

What is Smart Contract Security

Smart Contract Security is a part of security that deals with the problems or errors that come across while dealing with the processing of smart contracts in a blockchain. As you know, the Smart Contract is a code or program executed for the transactions occurring between two companies or groups. As the innovative Smart Contracts is applied in various fields like asset exchange, crowdfunding, etc., many security issues will be found and give tough challenges to the security system to resolve them.

What is Smart Contract Security Audit

A Smart Contract Security Audit is the process of examining and analyzing the smart controls code generated for digital transactions like cryptocurrency or blockchain. This audit is done by well-prepared and extensive methods for examining the code. This Audit is done to find the errors and issues related to the security loopholes present in the code. After finding the issues, they intend to improve and resolve the code to make it error-free. These Audits are necessary as the contracts are related to financial matters.

How do Smart Contract Security Audits work?

A typical smart contract security audit focuses on the code that powers various blockchain-related applications for coding errors, design issues, or other security risks. There are a number of steps that make up an ideal smart contract security audit.

1. Specification

The project’s architecture, its design implementation, and certain build processes help us in identifying the right specification, all of which are included in its README file. Some projects involve whitepapers and docstrings which describe some portions of the code and its purpose, but this doesn’t make up for the complete information provided by a specification. Teams in charge of the auditing process require a well-written specification to know about the code’s purpose to judge if it produces the right output when executed.

Auditors mostly ask when the ‘code freeze’ is scheduled to happen, meaning they need to know if the code is finalized or if any changes are expected. At this point, the code should be in its final preparation stage, looked over completely by the developers, and all fixes are identified and applied. The final commit hash is required for both the audit and the project team to agree on the final code, and any changes, if made, will not be included in the auditing process.

2. Testing

There are different types of tests to detect the issues within smart contracts. The unit test identifies issues in aspects of individual functions while integration tests focus on bigger portions of code. The number of tests done and the coverage achieved is crucial to the test’s success as it resolves all the easily identifiable bugs. Moreover, a test run also defines the purpose of the code and the auditors now have a better understanding of the intended purposes and the optimality of the code’s performance. Consequently, these details go into informal documentation, forming a bigger picture of the code and its expected functions.

A successful run of the tests ensures that no obvious issues will pop out later. If any fail, developers can be asked their opinion and the occurrence of these failures prior to the auditing process can be recorded. If all of them or a significant number fail, the auditing process may need to be paused and the code base reviewed by the developers for a major overhaul.

As we’ve specified, the greater the test coverage, the smoother and more efficient the auditing process. Therefore, verify the test line coverage and evaluate the portion of the code covered under the testing procedure. While 100% is the most desirable option, around 85-90% also works out great. Anything below 70% should be evaluated and more tests need to be included in the arsenal before moving forward.

3. Automated and Manual Testing Processes

Automated bug detection is the simplest way to ensure the resolution of the most obvious vulnerabilities. Automated analysis software can be designed to understand what kind of inputs allows the code to execute, simplifying the entire process by making it easier to recognized vulnerabilities. The auditing time is thus reduced and the team can focus on the more complex security risks.

An issue that pops up with automated testing is the occurrence of false positives. These testing tools cannot be programmed to understand the purpose and context of the code. Therefore, manual testing is required to analyze each false positive and test the authenticity of the claim.

Manual pentesting covers all of the complexities of the code and understands it in the intended direction of the developer. This is where specification plays its importance so that the auditing team understands the original purpose and then checks for the expected output.

4. Auditing report

Finally, the smart contract security audit ends with an auditing report that collects all the findings and provides recommendations. It’s essential that the project team understands the vulnerabilities discovered along with its recommendations so that these can be suitably implemented.

However defined the steps are, there are certain situations where one is required to innovate according to the situation and not follow the rulebook. An ideal smart contract security audit is dependent on its coverage and the effectiveness of identifying issues with constant monitoring to detect future troubles.

I hope this tutorial helped you to know about Smart Contracts. If you want to say anything, let us know through the comment sections. If you like this article, please share it and follow WhatVwant on Facebook, Twitter, and YouTube for more Technical tips.

Smart Contracts – FAQs