Smart Contract Audits: Cost, Importance, and Choosing the Right Auditor
A smart contract is a relatively new form of contract written in digital format. It automatically fulfils obligations when the contract terms are met or predefined criteria are satisfied. Many businesses are incorporating blockchain into their processes, and smart contracts are becoming the foundation of contracting. However, at this stage of development, smart contracts face challenges such as the absence of a legal framework, limited scope to digital assets, and concerns regarding trust in automated transactions.
To foster the further growth of smart contracts in business, enhancing security is of utmost importance. Auditing is widely recognised as the most effective and common practice for safeguarding smart contracts.
What is a smart contract audit and why is it important?
A distinctive feature of smart contracts is their ability to self-execute based on the conditions specified in the contract code. This code is stored on the blockchain, making it accessible to all interested parties. The contract execution does not require a central authority or mechanisms for monitoring condition fulfilment. Blockchain technology enables these functions.
Smart contracts can harbour hidden vulnerabilities that compromise their proper functioning and can be exploited by attackers. These vulnerabilities can impact a project’s reputation and hinder its future development.
A smart contract audit entails a comprehensive analysis of the code, with the aim of identifying errors and vulnerabilities. Auditors employ a combination of automated and manual verification methods to gain a holistic understanding of the contract’s operations and pinpoint weaknesses, which are not uncommon.
The audit reports provided by auditors serve as a valuable source of detailed information about vulnerabilities. Based on this information, necessary corrections can be made to ensure the proper execution of the contract. This instils confidence in investors and all stakeholders, elevating the level of trust in the contract.
The auditing process typically involves four stages:
- Initial analysis conducted by the auditor.
- The project team receives a report detailing identified vulnerabilities along with recommendations for addressing them.
- The team implements necessary changes based on the identified issues.
- The auditor submits a subsequent report, incorporating the changes made.
Depending on the audit results, a security certificate may be issued. For large projects, undergoing an audit is a standard procedure, and reports from reputable international companies like Certik, Slowmist or H-X Technologies hold significant value for investors.
What factors influence the cost of auditing smart contracts?
Smart contracts play a crucial role in facilitating financial transactions and carrying out essential functions within blockchain networks. Unlike other types of software, bug-free code is vital for smart contracts.
The following factors influence the cost of an audit:
- Code volume: The amount of code has the most substantial impact on the audit’s cost and duration. Simple contracts can be examined within two days, constituting the most cost-effective option. However, as the system complexity increases, comprehensive checks are required to obtain a complete understanding, leading to higher costs and longer audit durations. Auditing decentralised systems and applications can take anywhere from two to four weeks.
- Complexity: The type of contract also influences the cost and duration of the audit. Extended ERC20 contracts, with their advanced features, require extensive labour and time for verification. The more code and functions involved, the more challenging the audit becomes. Contracts that incorporate external files necessitate even more meticulous line-by-line examinations.
- Blockchain platform: The cost of auditing an Ethereum smart contract, for example, depends on factors such as gas fees, storage fees, and contract execution processes. Similarly, the cost of auditing contracts on platforms like Tron, Solana, Polkadot, and others is contingent upon their specific functionalities and architectures.
- Audit type: Audits can be either automated or manual.
Automated audits involve code scanning using automated tools, eliminating human errors.
Manual audits entail a meticulous line-by-line examination of the code to identify potential vulnerabilities and program errors. A comprehensive audit combines both automated and manual approaches.
Additionally, the reputation of the auditing company and the number of employees involved can also influence the cost.
How much does it cost to audit a simple smart contract?
The cost and timeframe for auditing a contract depend on its specific characteristics. As a general guideline, smart contract auditors typically charge between $5,000 and $15,000.
For simple code contracts, audit prices can start at $1,000, and some companies may offer services for as low as $500.
How much does it cost to audit a complex smart contract?
The complexity of a contract, including its code and conditions, directly impacts the cost of auditing. For large projects with extensive code and intricate contract logic, the audit cost exceeds $15,000 and even $30,000.
How to choose the right smart contract auditor?
One efficient method of selecting an audit company is to review their portfolio. A positive indicator is the successful development and practical application of some of their audited projects. The popularity of proven projects also enhances an audit company’s credibility. Protocols with substantial liquidity tend to attract hacker attention, making high-quality auditing essential for enhanced protection against attacks. While most auditors specialise in auditing Ethereum contracts, only a few companies have experience auditing projects on platforms such as Solana, Polygon, Avalanche, Fantom, and BNB.
Another criterion for selection is the quality of audit reports. A comprehensive report should detail identified vulnerabilities and provide actionable steps to address them. Particular attention should be paid to code quality and adherence to business logic.
Experienced companies possess their own knowledge bases regarding smart contract exploits. They continually update their expertise and sometimes even offer knowledge-sharing opportunities.
While it is natural for smart contract auditors to occasionally make mistakes, consistent errors should raise concerns, warranting caution when considering such auditors. If mistakes have resulted in funds loss due to hacking incidents, alternative auditors should be sought.
Reports with minimal or no errors can also raise suspicion, as projects without vulnerabilities are exceedingly rare.
Auditing companies with a strong reputation typically charge higher fees for their services, but these expenses are justified. Clients pay for thorough and high-quality audits, detailed reports containing recommendations for improvement, and, in the best cases, a second check conducted by the auditors to issue a security certificate after addressing identified issues.
Smart contract auditing has become the standard practice for projects aiming to establish a high level of trust. A certificate from a reliable audit company attests to the security of a smart contract, enhancing its value in the eyes of investors. The cost of such an audit can range from several thousand to tens of thousands of dollars, depending on the contract’s size, complexity, and depth of the audit process.