What is a Blockchain Protocol Audit?

What is a Blockchain Protocol Audit?

Blockchains are complex systems that help facilitate the use of smart contracts, distributed ledgers, and the whole consensus process that eliminates ‘trusted’ intermediaries. As the technology expands into the mainstream more people are using blockchains to do online transactions, store wealth, use DeFi to grow personal wealth, lend, borrow, and so much more. The distributed ledgers living on thousands of nodes stores information in a way that ensures transparency and integrity. The market value of the entire crypto industry reached $3 trillion last year, and with more of the value starting to flow between chains, the need for security is becoming more prevalent. 

The combination of all these elements necessitates that a blockchain system is as secure as possible. Security audits have become normalized in the industry with experts in the field opening private companies, employing hackers, developers, and blockchain experts to manage security at all levels. 

In this lesson you will learn about blockchain protocol audits. By the end of this lesson you will understand the benefits of conducting audits on a blockchain and the process in which it is done. 

What is a Blockchain Protocol Audit?

The interest and value of the blockchain space has increased tremendously over the last couple of years, bringing in promising projects with possibly new complex code into the mix, which could be vulnerable if left unchecked. A blockchain protocol audit is done to ensure that projects and their end-users are kept secure. These types of audits are led by experienced organizations that specialize in cybersecurity. There are various companies that provide security services like Hacken, PeckShield, Certik, and others. The majority of cybersecurity companies will be able to help projects that build on Ethereum, Solana, Avalanche, and Binance Smart Chain. Projects built on chains on the fringe might require more specialized help. 

Blockchain and smart contract audits are similar to regular code audits, which involve investigating code to find any vulnerability or security flaws before the code is openly deployed. An audit is performed by a team of certified smart contract developers who examine the code that is used to support the terms of the smart contract. Traditionally a project will do an audit before they go live, this is done so that developers can pinpoint bugs or vulnerabilities before the project is launched and the contracts are opened to the public. Launchpad’s such as Ignition for example, require projects to go through a round of audits to be even considered for the platform. 

How it is Done?

One of the important objectives of a blockchain audit is to detect bugs or errors in code that could pose a high threat to the system. Before the audit begins the security team has to gain a deep understanding of the workings of the project and what its key components and use cases are, reading through the whitepaper and website etc.

Companies usually start analyzing the blockchain by using automated bug detection tools to look for common vulnerabilities. The code of the project is systematically reviewed and executed to ensure the code executes the way it should every time. A critical step in the audit is to do threat modeling, this reveals attempts to tamper with data or data spoofing; it also allows users to detect attempted DDoS attacks. 

In the last step, the audit is concluded and information is provided about possible vulnerabilities and exploits. An estimation of the scope of threats is given and how these problems can be remedied. Audits can take anywhere from a few days to months depending on the size and scope of the project. 

Value of an Audit

Having a blockchain project audited can prevent possible exploitations and vulnerabilities that could cost it everything. Blockchain audits also cover smart contracts, this means that digital assets stored and transferred by smart contracts can be kept safe. An added benefit of having a top-quality cybersecurity company audit a project is that when certified it stands as an accolade of the security and reliability of the project. This also helps new people that want to start using crypto to discern between safe and risky projects. Projects can also outsource their entire security function to a whole team of experts instead of having one inside the company.

As the adoption of crypto increases so does the need for a secure ecosystem that can protect all the new entrants. Having a project audited ensures they and their users are safe. 

Lesson Summary (TL;DR)

A blockchain protocol audit is an important step for every project. It is a holistic review of code which not only looks at the blockchain code itself but smart contracts as well. A blockchain protocol audit searches for any vulnerabilities that could be exploited by bad actors, it does this by:

• Fully understanding the workings of a project
• Using automated bug detection tools to search for common vulnerabilities
• Systematic review and execution of code
• Threat modeling - to reveal attempts of tampering and DDoS attacks
• Providing a final assessment of the code as well as remedies for any uncovered vulnerabilities 

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Resources

1. GopalaKrishna, R. (2017, 6 November). Audit Techniques & Tools 101. Secureum.Substack.com. https://secureum.substack.com/p/audit-techniques-and-tools-101 
2. Hacken. (n.d). Blockchain Protocol Security Audit. Hacken.io. https://hacken.io/services/blockchain-security/blockchain-protocol-security/ 
3. GopalaKrishna, R. (2021, 2 October) Ethereum 101. - https://secureum.substack.com/p/ethereum-101‍
4. Bible, W. et al. (2017). Blockchain Technology and Its Potential Impact on the Audit and Assurance Profession. Deloitte Development LLC. https://us.aicpa.org/content/dam/aicpa/interestareas/frc/assuranceadvisoryservices/downloadabledocuments/blockchain-technology-and-its-potential-impact-on-the-audit-and-assurance-profession.pdf  

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About Hacken

Hacken is a cybersecurity auditor born in 2017 with a vision of transforming Web3 into a more ethical place. With 5+ years of experience, hundreds of blockchain partners, and thousands of secured crypto projects, Hacken protects technological businesses and crypto communities worldwide with the most competitive suite of professional cybersecurity services. 

Hacken in figures:

• 1,070+ clients, including THORSTARTER, ConstitutionDAO, XTblock, Paribus, to name a few
• 180+ partners including Avalanche, Polkastarter, CoinMarketCap, Weld Money, CoinGecko, Solana Foundation, Simplex, to name a few
• 23/50 top crypto exchanges are Hacken clients
• $10B in users’ assets saved from being stolen by hackers

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Strategic goal: get a 20% share in the Web 3.0 cybersecurity market by 2024.‍

For more on Hacken follow them on:

Twitter | Discord |Telegram | Hacken.io

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