Understanding and Combating Smart Contract Hacking

Article by Steller7 - Published: 29/01/2023

Smart contracts are a revolutionary technology that allows for the execution of self-executing contracts with the terms of the agreement written into code. They were first proposed by Nick Szabo in 1994 and were later implemented on blockchain technology, which provides the necessary immutability and transparency for their proper functioning.

Smart contracts are stored on the blockchain and once they are deployed, they cannot be altered. This is one of the key benefits of smart contracts as it ensures that the terms of the contract cannot be changed without the consent of all parties involved. However, this immutability also means that any bugs or vulnerabilities present in the contract code at the time of deployment will remain forever.

Smart contract hacking occurs when an attacker exploits these bugs or vulnerabilities to steal or manipulate funds. One example of a smart contract vulnerability is the "reentrancy" vulnerability, where an attacker can repeatedly call a function in the contract before the original call has completed, allowing them to drain the contract's balance. Another example is the "unchecked-send" vulnerability, where the contract does not properly check the balance of the sender before sending funds, allowing an attacker to send an arbitrary amount of money to themselves.

Other examples of smart contract vulnerabilities include "integer overflow/underflow" where a contract can be tricked into accepting a large number as input and "front-running" where an attacker can observe the execution of a contract and take advantage of the information to execute their own transaction.

To combat smart contract vulnerabilities, developers must thoroughly test and audit their contract code before deployment. This includes performing unit tests, functional tests, and security audits to ensure that the contract is free from bugs and vulnerabilities. Developers should also be aware of known smart contract vulnerabilities and make sure to include proper safeguards in their contract code.

Additionally, the regular security audit and bug bounties can help minimize the risk of smart contract vulnerabilities. Developers can also use verified smart contract libraries and frameworks, such as OpenZeppelin, which provide pre-built and tested smart contract code, reducing the risk of vulnerabilities.

In conclusion, smart contracts have the potential to revolutionize the way we conduct business and exchange value. However, their security must be taken seriously and proper measures must be taken to mitigate the risk of smart contract hacking. By following best practices and utilising tools like verified libraries and frameworks, developers can create smart contracts that are secure and reliable.