Ensure Smart Contract Success with These Expert Audit Tips

Paulina Lewandowska

03 Jan 2023
Ensure Smart Contract Success with These Expert Audit Tips

The use of smart contracts, a tool that enables the automation of several processes and transactions, has grown significantly in the realm of blockchain technology. Before these smart contracts are implemented, it is crucial to guarantee their security and dependability. Smart contract auditing is useful in this situation.

The finest advice and methods for auditing smart contracts, as provided by seasoned smart contract developers, will be covered in this article. You may make sure that your smart contracts are of the greatest caliber and without flaws by adhering to these suggestions.

We hope that this article will provide valuable insights and guidance for those looking to audit their smart contracts effectively.

Understand the purpose and functionality of the contract

Before performing an audit, it is crucial to comprehend the function and intended use of a smart contract. This will enable you to find any potential problems or weaknesses and make sure the contract is functioning as planned.

The following points should be taken into account when figuring out the function and goal of a smart contract:

  1. Who will use the contract, and what are their needs and objectives? Identify the stakeholders.
  2. Establish the business logic: What is the contract meant to accomplish? What are the parameters for the input and output, and how should the contract handle various circumstances?
  3. Recognize the environment: How will the contract be used in that environment? What are the limitations and restrictions of the blockchain platform that will be used for its deployment?
  4. Take into account the long-term effects of the contract: How will the agreement be used going forward? Will it ever require updating or changing, and if so, how will those changes be handled?

You may more easily spot possible problems and make sure the contract is appropriate for its intended use by fully comprehending the function and purpose of a smart contract.

Review the code

Understanding the function and intended use of the contract is crucial when conducting a smart contract audit. This will enable you to find any potential problems or weaknesses and make sure the contract is functioning as planned. A static code analysis tool can be used to evaluate the code and help find potential problems including grammatical mistakes, bugs, and security vulnerabilities. It's also critical to adhere to best practices for developing smart contracts, such as making use of secure libraries, managing exceptions correctly, and carrying out appropriate testing and error management. You should also look for widespread security flaws like uninitialized variables, reentrancy attacks, and unsafe random number generation. Additionally, it's critical to ensure that the code is well-written, simple to comprehend, and maintained, as well as that the contract's logic is right and that it appropriately addresses all potential cases. You can see any problems and make sure the contract is secure and error-free by carefully going over the code.

Test the smart contract

A smart contract must be extensively examined during testing to make sure it works as planned and has no unforeseen repercussions. For this, you need to:

  1. Create test cases that account for all edge situations and potential eventualities. This will make sure that every possible problem is found and that the contract is thoroughly tested.
  2. Automate the testing procedure using a testing framework like Ganache or Truffle. As a result, running test cases and monitoring the outcomes will be simpler.
  3. Utilize tools like Mythril or Oyente to scan for common security flaws. By doing this, you can make that the contract is safe and has no weaknesses that could be used against it.
  4. Verify that the contract operates as planned and generates the desired outcomes. This will support the idea that the contract is operating properly.
  5. Verify that the contract is optimized for gas utilization and free of extra code that can drive up gas prices. This will help to guarantee the contract's effectiveness and economy.

Check for correctness

A crucial step in the audit process is verifying a smart contract's accuracy. Verifying that a contract accomplishes its goals and complies with the contract owner's specifications is part of ensuring its validity. You must first analyze the contract's details and comprehend the conditions and limitations in order to verify that everything is correct. You can use this to find any potential problems or places that require more investigation.

The next step is to check the code for flaws or faults to make sure it follows the contract's logic. This will make it easier to verify that the contract's logic is sound and that it appropriately accounts for all potential outcomes.

It is crucial to confirm that the contract complies with applicable rules and regulations if it will be utilized in a regulated environment. This can entail consulting a legal expert or doing more investigation to verify compliance.

You can make sure the contract is appropriate for its intended use and has no unintended consequences by carefully checking for accuracy. This is crucial to ensuring that the contract operates correctly and meets its intended goals.

Check for efficiency

You should make sure the contract is optimized for gas usage and free of any extraneous code that can raise gas prices in order to verify for efficiency. This could lower the cost of using the contract and increase its usefulness for users.

You should study the contract's code to verify for efficiency and search for any places where gas utilization could be maximized. To reduce gas consumption, this may entail eliminating pointless code or improving certain operations. Additionally, you should test the contract to gauge its gas consumption and make sure it is within acceptable bounds.

Checking for backward compatibility

Checking for backward compatibility is also important if the contract is intended to be used on a specific blockchain platform. To check for backward compatibility, you should ensure that the contract is compatible with the version of the platform it will be deployed on. This may involve reviewing the contract's code to ensure that it uses features and functions that are supported by the platform, and testing the contract to confirm that it functions correctly on the platform.

By checking for efficiency and backward compatibility, you can ensure that the contract is optimized for use and can be deployed smoothly on the intended platform.

Review the contract's dependencies

It is crucial to examine the contract's dependencies during a smart contract audit to make sure that it is utilizing the most recent and safe versions of any external libraries or contracts it depends on. It is vital to ensure that the contract is using the most recent and secure versions because outdated or insecure dependencies can cause flaws or mistakes.

You should first look at the contract's code to find any external libraries or other contracts that it depends on before reviewing the contract's dependencies. The versions of these dependencies should then be checked to make sure they are current and secure. You should suggest updating the contract's dependencies to the most recent and secure versions if you discover that they are out-of-date or unsafe.

Checking the dependencies that the contract is using for any vulnerabilities or known problems is also a smart idea. Researching the dependencies and looking for any security advisories or other warnings will help you achieve this. You can contribute to making sure that the contract is as secure as possible by going over the dependencies in this manner.

Overall, a critical stage in the smart contract audit process is carefully analyzing the contract's dependencies. By doing so, you can lower the possibility that the contract contains flaws or inaccuracies and increase its security.

Review the contract's deployment and ownership

To make sure that a smart contract is secure and that only authorized parties can make modifications to it, it is required to review the deployment and ownership of the contract during an audit. This makes it more difficult for someone to gain access or modify the contract.

You must first determine who the contract's owner is and how it was used before you can analyze the contract's ownership and deployment. The contract should then be owned and deployed securely, utilizing best practices like a secure key management system and adhering to appropriate security protocols.

Additionally, make sure that only those with permission can alter the contract. This can entail checking the permissions and access controls of the contract to make sure that only parties with the proper authorization can change it.

In general, examining the contract's deployment and ownership is an important step in the process of a smart contract audit. In order to avoid unauthorized access or contract tampering, it can assist ensure that the contract is secure and that only authorized parties are able to make changes to it.

Additionally, make sure that only those with permission can alter the contract. This can entail checking the permissions and access controls of the contract to make sure that only parties with the proper authorization can change it.

In general, examining the contract's deployment and ownership is an important step in the process of a smart contract audit. In order to avoid unauthorized access or contract tampering, it can assist ensure that the contract is secure and that only authorized parties are able to make changes to it.

It is advisable to consult a legal expert to ensure that the contract is enforceable if it is meant to have legal ramifications. You can better comprehend the contract's legal ramifications and ensure that it is constructed in a way that makes it enforceable by consulting a legal expert. They can also provide you advice on any further measures that might be required to make sure the contract is legally enforceable.

Overall, a critical stage in the smart contract audit process is taking the contract's legal consequences into account. It can aid in ensuring that the contract complies with all applicable legal requirements and is legally enforceable.

Conclusion

A thorough audit is necessary to make sure a smart contract is trustworthy and safe. As part of a smart contract audit, it is important to thoroughly test the contract to make sure it works as intended and has no unintended consequences. You should also confirm that the contract satisfies the contract owner's requirements, look for efficiency and backward compatibility, review the contract's dependencies, deployment, and ownership, and think about the contract's legal ramifications. These guidelines can help you make sure that a smart contract is trustworthy, safe, and appropriate for its intended use.

Be sure to read our other articles on the subject for more details on smart contract audits. You may gain extra knowledge and best practices for auditing smart contracts from these resources.

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Token Engineering Process

Kajetan Olas

13 Apr 2024
Token Engineering Process

Token Engineering is an emerging field that addresses the systematic design and engineering of blockchain-based tokens. It applies rigorous mathematical methods from the Complex Systems Engineering discipline to tokenomics design.

In this article, we will walk through the Token Engineering Process and break it down into three key stages. Discovery Phase, Design Phase, and Deployment Phase.

Discovery Phase of Token Engineering Process

The first stage of the token engineering process is the Discovery Phase. It focuses on constructing high-level business plans, defining objectives, and identifying problems to be solved. That phase is also the time when token engineers first define key stakeholders in the project.

Defining the Problem

This may seem counterintuitive. Why would we start with the problem when designing tokenomics? Shouldn’t we start with more down-to-earth matters like token supply? The answer is No. Tokens are a medium for creating and exchanging value within a project’s ecosystem. Since crypto projects draw their value from solving problems that can’t be solved through TradFi mechanisms, their tokenomics should reflect that. 

The industry standard, developed by McKinsey & Co. and adapted to token engineering purposes by Outlier Ventures, is structuring the problem through a logic tree, following MECE.
MECE stands for Mutually Exclusive, Collectively Exhaustive. Mutually Exclusive means that problems in the tree should not overlap. Collectively Exhaustive means that the tree should cover all issues.

In practice, the “Problem” should be replaced by a whole problem statement worksheet. The same will hold for some of the boxes.
A commonly used tool for designing these kinds of diagrams is the Miro whiteboard.

Identifying Stakeholders and Value Flows in Token Engineering

This part is about identifying all relevant actors in the ecosystem and how value flows between them. To illustrate what we mean let’s consider an example of NFT marketplace. In its case, relevant actors might be sellers, buyers, NFT creators, and a marketplace owner. Possible value flow when conducting a transaction might be: buyer gets rid of his tokens, seller gets some of them, marketplace owner gets some of them as fees, and NFT creators get some of them as royalties.

Incentive Mechanisms Canvas

The last part of what we consider to be in the Discovery Phase is filling the Incentive Mechanisms Canvas. After successfully identifying value flows in the previous stage, token engineers search for frictions to desired behaviors and point out the undesired behaviors. For example, friction to activity on an NFT marketplace might be respecting royalty fees by marketplace owners since it reduces value flowing to the seller.

source: https://www.canva.com/design/DAFDTNKsIJs/8Ky9EoJJI7p98qKLIu2XNw/view#7

Design Phase of Token Engineering Process

The second stage of the Token Engineering Process is the Design Phase in which you make use of high-level descriptions from the previous step to come up with a specific design of the project. This will include everything that can be usually found in crypto whitepapers (e.g. governance mechanisms, incentive mechanisms, token supply, etc). After finishing the design, token engineers should represent the whole value flow and transactional logic on detailed visual diagrams. These diagrams will be a basis for creating mathematical models in the Deployment Phase. 

Token Engineering Artonomous Design Diagram
Artonomous design diagram, source: Artonomous GitHub

Objective Function

Every crypto project has some objective. The objective can consist of many goals, such as decentralization or token price. The objective function is a mathematical function assigning weights to different factors that influence the main objective in the order of their importance. This function will be a reference for machine learning algorithms in the next steps. They will try to find quantitative parameters (e.g. network fees) that maximize the output of this function.
Modified Metcalfe’s Law can serve as an inspiration during that step. It’s a framework for valuing crypto projects, but we believe that after adjustments it can also be used in this context.

Deployment Phase of Token Engineering Process

The Deployment Phase is final, but also the most demanding step in the process. It involves the implementation of machine learning algorithms that test our assumptions and optimize quantitative parameters. Token Engineering draws from Nassim Taleb’s concept of Antifragility and extensively uses feedback loops to make a system that gains from arising shocks.

Agent-based Modelling 

In agent-based modeling, we describe a set of behaviors and goals displayed by each agent participating in the system (this is why previous steps focused so much on describing stakeholders). Each agent is controlled by an autonomous AI and continuously optimizes his strategy. He learns from his experience and can mimic the behavior of other agents if he finds it effective (Reinforced Learning). This approach allows for mimicking real users, who adapt their strategies with time. An example adaptive agent would be a cryptocurrency trader, who changes his trading strategy in response to experiencing a loss of money.

Monte Carlo Simulations

Token Engineers use the Monte Carlo method to simulate the consequences of various possible interactions while taking into account the probability of their occurrence. By running a large number of simulations it’s possible to stress-test the project in multiple scenarios and identify emergent risks.

Testnet Deployment

If possible, it's highly beneficial for projects to extend the testing phase even further by letting real users use the network. Idea is the same as in agent-based testing - continuous optimization based on provided metrics. Furthermore, in case the project considers airdropping its tokens, giving them to early users is a great strategy. Even though part of the activity will be disingenuine and airdrop-oriented, such strategy still works better than most.

Time Duration

Token engineering process may take from as little as 2 weeks to as much as 5 months. It depends on the project category (Layer 1 protocol will require more time, than a simple DApp), and security requirements. For example, a bank issuing its digital token will have a very low risk tolerance.

Required Skills for Token Engineering

Token engineering is a multidisciplinary field and requires a great amount of specialized knowledge. Key knowledge areas are:

  • Systems Engineering
  • Machine Learning
  • Market Research
  • Capital Markets
  • Current trends in Web3
  • Blockchain Engineering
  • Statistics

Summary

The token engineering process consists of 3 steps: Discovery Phase, Design Phase, and Deployment Phase. It’s utilized mostly by established blockchain projects, and financial institutions like the International Monetary Fund. Even though it’s a very resource-consuming process, we believe it’s worth it. Projects that went through scrupulous design and testing before launch are much more likely to receive VC funding and be in the 10% of crypto projects that survive the bear market. Going through that process also has a symbolic meaning - it shows that the project is long-term oriented.

If you're looking to create a robust tokenomics model and go through institutional-grade testing please reach out to contact@nextrope.com. Our team is ready to help you with the token engineering process and ensure your project’s resilience in the long term.

FAQ

What does token engineering process look like?

  • Token engineering process is conducted in a 3-step methodical fashion. This includes Discovery Phase, Design Phase, and Deployment Phase. Each of these stages should be tailored to the specific needs of a project.

Is token engineering meant only for big projects?

  • We recommend that even small projects go through a simplified design and optimization process. This increases community's trust and makes sure that the tokenomics doesn't have any obvious flaws.

How long does the token engineering process take?

  • It depends on the project and may range from 2 weeks to 5 months.

What is Berachain? 🐻 ⛓️ + Proof-of-Liquidity Explained

Karolina

18 Mar 2024
What is Berachain? 🐻 ⛓️ + Proof-of-Liquidity Explained

Enter Berachain: a high-performance, EVM-compatible blockchain that is set to redefine the landscape of decentralized applications (dApps) and blockchain services. Built on the innovative Proof-of-Liquidity consensus and leveraging the robust Polaris framework alongside the CometBFT consensus engine, Berachain is poised to offer an unprecedented blend of efficiency, security, and user-centric benefits. Let's dive into what makes it a groundbreaking development in the blockchain ecosystem.

What is Berachain?

Overview

Berachain is an EVM-compatible Layer 1 (L1) blockchain that stands out through its adoption of the Proof-of-Liquidity (PoL) consensus mechanism. Designed to address the critical challenges faced by decentralized networks. It introduces a cutting-edge approach to blockchain governance and operations.

Key Features

  • High-performance Capabilities. Berachain is engineered for speed and scalability, catering to the growing demand for efficient blockchain solutions.
  • EVM Compatibility. It supports all Ethereum tooling, operations, and smart contract languages, making it a seamless transition for developers and projects from the Ethereum ecosystem.
  • Proof-of-Liquidity.This novel consensus mechanism focuses on building liquidity, decentralizing stake, and aligning the interests of validators and protocol developers.

MUST READ: Docs

EVM-Compatible vs EVM-Equivalent

EVM-Compatible

EVM compatibility means a blockchain can interact with Ethereum's ecosystem to some extent. It can interact supporting its smart contracts and tools but not replicating the entire EVM environment.

EVM-Equivalent

An EVM-equivalent blockchain, on the other hand, aims to fully replicate Ethereum's environment. It ensures complete compatibility and a smooth transition for developers and users alike.

Berachain's Position

Berachain can be considered an "EVM-equivalent-plus" blockchain. It supports all Ethereum operations, tooling, and additional functionalities that optimize for its unique Proof-of-Liquidity and abstracted use cases.

Berachain Modular First Approach

At the heart of Berachain's development philosophy is the Polaris EVM framework. It's a testament to the blockchain's commitment to modularity and flexibility. This approach allows for the easy separation of the EVM runtime layer, ensuring that Berachain can adapt and evolve without compromising on performance or security.

Proof Of Liquidity Overview

High-Level Model Objectives

  • Systemically Build Liquidity. By enhancing trading efficiency, price stability, and network growth, Berachain aims to foster a thriving ecosystem of decentralized applications.
  • Solve Stake Centralization. The PoL consensus works to distribute stake more evenly across the network, preventing monopolization and ensuring a decentralized, secure blockchain.
  • Align Protocols and Validators. Berachain encourages a symbiotic relationship between validators and the broader protocol ecosystem.

Proof-of-Liquidity vs Proof-of-Stake

Unlike traditional Proof of Stake (PoS), which often leads to stake centralization and reduced liquidity, Proof of Liquidity (PoL) introduces mechanisms to incentivize liquidity provision and ensure a fairer, more decentralized network. Berachain separates the governance token (BGT) from the chain's gas token (BERA) and incentives liquidity through BEX pools. Berachain's PoL aims to overcome the limitations of PoS, fostering a more secure and user-centric blockchain.

Berachain EVM and Modular Approach

Polaris EVM

Polaris EVM is the cornerstone of Berachain's EVM compatibility, offering developers an enhanced environment for smart contract execution that includes stateful precompiles and custom modules. This framework ensures that Berachain not only meets but exceeds the capabilities of the traditional Ethereum Virtual Machine.

CometBFT

The CometBFT consensus engine underpins Berachain's network, providing a secure and efficient mechanism for transaction verification and block production. By leveraging the principles of Byzantine fault tolerance (BFT), CometBFT ensures the integrity and resilience of the Berachain blockchain.

Conclusion

Berachain represents a significant leap forward in blockchain technology, combining the best of Ethereum's ecosystem with innovative consensus mechanisms and a modular development approach. As the blockchain landscape continues to evolve, Berachain stands out as a promising platform for developers, users, and validators alike, offering a scalable, efficient, and inclusive environment for decentralized applications and services.

Resources

For those interested in exploring further, a wealth of resources is available, including the Berachain documentation, GitHub repository, and community forums. It offers a compelling vision for the future of blockchain technology, marked by efficiency, security, and community-driven innovation.

FAQ

How is Berachain different?

  • It integrates Proof-of-Liquidity to address stake centralization and enhance liquidity, setting it apart from other blockchains.

Is Berachain EVM-compatible?

  • Yes, it supports Ethereum's tooling and smart contract languages, facilitating easy migration of dApps.

Can it handle high transaction volumes?

  • Yes, thanks to the Polaris framework and CometBFT consensus engine, it's built for scalability and high throughput.