This article was posted by a community member. The author is David Tarditi, Vice President of Engineering at CertiK, a Web3 smart contract auditing company.
Summary
Formal verification of smart contracts protects them from errors, vulnerabilities, and other adverse conditions. In this process, human experts convert the smart contract's logic into mathematical statements, and then use an automated process to check the actual logic against a model of the contract's expected behavior. Combining formal verification and manual auditing, we can conduct a comprehensive assessment of the security of smart contracts.
Introduction
Smart contracts are computer programs deployed on the blockchain that automatically run when certain conditions are met. Smart contracts can be very simple or extremely complex and can hold assets worth millions or even billions of dollars.
If there are security holes in the smart contract code, it may have devastating consequences, such as the theft of all assets held by criminals. In 2021, $50 million was stolen from automated market maker (AMM) Uranium Finance due to a typo in a smart contract.
Also in 2021, Compound Finance mistakenly issued $80 million in rewards due to a single coding error. In 2022, $320 million was stolen from Wormhole Bridge due to an error in the smart contract.
Therefore, it is important to get your smart contract program right from the beginning. Smart contracts adopt an open source model, which means that once the contract is deployed, the code is made public. If a hacker discovers a bug, they can immediately exploit it. Additionally, the normal practice of patching security vulnerabilities over time is ineffective because the code of smart contracts often cannot be modified after deployment.
How does smart contract verification work?
Formal verification of smart contracts is achieved by presenting the logic and expected behavior of the smart contract as mathematical statements. Auditors then use automated tools to check whether these statements are correct.
The process involves:
Define the specifications and expected characteristics of the contract in a formal language.
Convert the code of a contract into a formal statement, such as a mathematical model or logic.
Verify contract specifications and properties using automated theorem proving or model checking.
Repeat the validation process to find and fix any errors or deviations from expected characteristics.
Why smart contract verification is important
By applying mathematical reasoning, it helps ensure that formally verified smart contracts are free from errors, vulnerabilities, and other adverse situations. Verification also helps increase trust and confidence in the contract because its properties have been rigorously tested and are correct and reliable.
These examples below outline how smart contract verification can help prevent significant financial losses and other catastrophic consequences.
Uniswap
Uniswap is a well-known AMM. Uniswap V1 smart contract underwent formal verification during the development process. Prior to release, this formal verification found and fixed some rounding errors, preventing Uniswap V1 from being drained of funds.
Balancer
Balancer V2 is also a proven AMM. Formal verification discovered and fixed a fee calculation error in the flash loan feature in the smart contract that left the trading platform vulnerable to theft.
SafeMoon
After the deployment of SafeMoon V1, a very small error was discovered through formal verification. If the error was not discovered, if the contract owner performed certain operations before giving up ownership, the contract owner might regain it after giving up. the contract.
Most manual audits of the SafeMoon V1 fork miss this bug because specific combinations of program variable values need to be analyzed to find it. Humans can easily miss this problem, but machines can catch it in time.
How formal verification and manual auditing work together
Formal verification provides a systematic and automated way to check the logic and behavior of a contract against its expected characteristics. This makes it easier to identify and fix any potential bugs or vulnerabilities. This is particularly useful for complex, subtle issues that would be difficult to detect through manual inspection.
Manual auditing involves experts reviewing the code, design, and deployment of the contract. Auditors use their experience and expertise to identify security risks and assess the overall security posture of the contract. They can also confirm that the formal verification process is performed correctly and check for any issues that automated tools may not detect.
Combining formal verification and manual auditing, we can conduct a comprehensive assessment of the security of smart contracts. This improves the odds of finding and fixing any vulnerabilities. In doing so, we are adopting a defense-in-depth security approach that combines the expertise of humans and machines.
Conclusion
To ensure the security of smart contracts, formal verification and manual auditing must be combined to ensure a comprehensive and thorough assessment of the security posture of smart contracts.
Although formal verification is more resource intensive, it is a worthwhile investment for contracts with high value or high risk factors. After all, at the end of the day, security is more important than anything else. Make sure to prioritize security and ensure that smart contracts are free from bugs, vulnerabilities, and adverse unexpected behaviors.
Further reading
What is a smart contract?
What is smart contract security audit?
Disclaimer and risk warning: The contents of this article are facts and are for general information and educational purposes only and do not constitute any representation or warranty. This article should not be construed as financial advice and is not recommending that you purchase any specific product or service. Digital asset prices may fluctuate. The value of your investment may fall as well as rise and you may not get back the principal invested. You are solely responsible for your own investment decisions and Binance Academy is not responsible for any losses you may suffer. This material does not constitute financial advice.
