This article is a post from the community. The author is David Tarditi, VP of Engineering at CertiK, a Web3 smart contract audit firm.
Summary
Formal verification ensures that smart contracts are free from bugs, vulnerabilities, and other undesirable behavior. In the process, an expert represents the smart contract logic in a mathematical statement, then runs it through an automated process that compares the actual logic with a model of the contract's expected behavior. The combination of formal verification and manual auditing provides a comprehensive evaluation of smart contract security.
Introduction
Smart contracts are computer programs implemented on a blockchain that run automatically when certain conditions are met. Smart contracts can range from simple to very complex, and can store assets worth millions or even billions of dollars.
Security vulnerabilities in smart contract code can have detrimental consequences, including theft of all assets stored by the smart contract. In 2021, $50 million of automated market maker (AMM) Uranium Finance's funds were stolen due to a mistake in a smart contract.
Also in 2021, Compound Finance issued $80 million in unearned rewards due to a single character error. In 2022, $320 million was stolen from Wormhole Bridge due to a bug in one of the smart contracts.
It is important to program smart contracts correctly at the start. Smart contracts are open source, meaning the code is publicly available after the contract is implemented. If a hacker finds a bug, he can immediately exploit it. Additionally, fixing security vulnerabilities over time is not a good option, as smart contract code usually cannot be modified once deployed.
How Does Smart Contract Verification Work?
The way formal smart contract verification works is by presenting the logic and desired behavior of the smart contract in the form of mathematical statements. Then, auditors use automated tools to ensure that the statements are correct.
The process includes:
Defines the specifications and desired characteristics of a contract in formal language.
Translating contract code into a formal representation, such as a mathematical or logical model.
Use theorem provers or automated model checkers to validate contract specifications and characteristics.
Repeat the verification process to find and correct errors or deviations from desired characteristics.
Reasons why Smart Contract Verification is Important
The use of mathematical reasoning helps ensure that smart contracts that have undergone formal verification are free from bugs, vulnerabilities, and other undesirable behavior. This also helps increase trust and confidence in the contract, as its characteristics are proven to be true.
Below are some examples that show that smart contract verification has helped prevent major financial losses and other detrimental impacts.
Uniswap
Uniswap is a well-known AMM. When implemented, the Uniswap V1 smart contract has gone through formal verification. Prior to release, this formal verification discovered and corrected rounding errors that could have caused Uniswap V1 funds to drain.
Balancer
Balancer V2 is also an AMM that has gone through formal verification. Formal verification discovered and corrected incorrect fee calculations related to flash loan functionality that could have made the exchange vulnerable to theft.
SafeMoon
SafeMoon V1 contained a subtle bug that was discovered by formal verification after deployment. The owner can relinquish ownership of the contract and then get it back if certain operations are performed before relinquishing ownership.
This bug was missed in most manual audits of the SafeMoon V1 fork because it required analyzing certain combinations of program variable values to find it. These bugs are easy for humans to miss and easy for machines to track.
Benefits of Combining Formal Verification and Manual Auditing
Formal verification provides a systematic and automated way to compare the logic and behavior of a contract with its desired characteristics. This makes it easier to identify and fix potential errors or bugs. This process is especially useful for spotting complex, subtle problems that may be difficult to detect through manual inspection.
In a manual audit, an expert reviews the code, design, and implementation of a contract. Auditors use their experience and expertise to identify security risks and evaluate the overall security posture of the contract. They can also ensure that the formal verification process has been carried out correctly and look for problems that may not be detected by automated tools.
By combining formal verification and manual audits, you get a comprehensive and comprehensive evaluation of smart contract security. This increases the chances of finding and fixing vulnerabilities. The result is a defense-in-depth approach to security that leverages the unique capabilities of humans and machines.
Closing
In order to ensure the security of smart contracts, it is important to use formal verification and manual audits to ensure a comprehensive and comprehensive evaluation of the security posture of smart contracts.
Although it requires a lot of resources, formal verification is worth the investment for contracts with high-value or high-risk factors. Ultimately, prioritizing security and ensuring smart contracts are free from bugs, vulnerabilities and undesirable behavior is important.
Further Reading
What are Smart Contracts?
What is a Smart Contract Security Audit?
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