With many businesses adopting blockchain technology and Smart Contracts, offering reliable security audits in the industry has become increasingly important.
Businesses may protect their assets and contracts by recognizing and preventing harmful assaults.
This blog post will explore the different attacks a group of criminals can carry on Smart Contracts. We’ll also look at real-world instances of assaults to help you secure your contracts.
What are Smart Contracts? Understanding the Benefits of This Technology
What are smart contracts? They are digital contracts that anyone can use to facilitate, verify, or enforce the negotiation or performance of an agreement. You can use smart contracts for various purposes, such as managing information, property rights, and financial transactions.
Nick Szabo first proposed smart contracts in 1996. A smart contract is “a computerized transaction mechanism that executes the provisions of a contract,” according to his definition. Szabo designed smart contracts to provide greater security than traditional contracts and reduce contracting costs.
Since then, many researchers and developers have further developed and refined the concept of smart contracts.
Ethereum, a decentralized platform that runs smart contracts, was launched in 2015. Ethereum has created various decentralized applications, such as decentralized exchanges, games, and prediction markets.
The use of smart contracts can have some benefits. First, they can automate the execution of contracts. This can save time and money by eliminating the need for intermediaries, such as lawyers or banks.
Second, smart contracts can provide greater security than traditional contracts. They can serve the purpose of creating tamper-proof transaction records and enforcing the performance of contracts.
Finally, smart contracts can facilitate the use of decentralized applications. By deploying these applications on a blockchain, developers can create trustless systems that no single entity can control.
The Types of Attacks That Can Target Smart Contracts
We can identify at least five types of malicious attacks that criminals may carry out on Smart Contracts:
- Tampering with the code
- DoS attacks
- DDoS attacks
- Sybil attacks
- Replay attacks
The subsections below analyze in greater detail each of these typical attacks.
When it comes to Smart Contracts, code is king. So, it should be no surprise that one type of attack hackers can carry out is code tampering. This is where someone goes into the code and makes changes, adding malicious functionality or removing existing security measures.
Some common types of attacks that can occur via code tampering include:
- Adding malicious code that allows the attacker to steal funds from the contract
- Adding code that allows the attacker to control or modify the contract’s behavior
- Removing security measures that prevent unauthorized access to the contract’s funds or data
- Inserting bugs that cause the contract to malfunction or fail
These attacks can be challenging to detect, especially if the attacker is skilled at hiding their tracks. However, there are some telltale signs an auditor can look for to indicate that someone tapered with a contract.
Some of the most common indicators of code tampering include:
- Code that someone modified or added that is not consistent with the rest of the contract’s code
- Unusual or unexpected behavior in the contract’s execution
- Missing or commented out code that was previously present
If an auditor suspects someone tampered with a contract, they can confirm their suspicions by conducting a code review. This involves closely examining the contract’s code to look for suspicious changes or behavior.
DoS (Denial of Service) attacks are a common phenomenon in the online world. In a DoS attack, the attacker floods the system with requests to prevent legal users from accessing the contract. They can happen both in the Web2 and Web3 worlds.
Some ways to protect your Smart Contract from DoS attacks include:
- Requiring a certain number of confirmations for transactions
- Limiting the number of transactions that the system can process at once
- Using an oracle to monitor the network for attacks and shut down the contract if necessary
If you think your contract may be under attack, contact a professional auditor as soon as possible. Some popular auditors in this field are SolidProof, OpenZeppelin, and Certik. They can assist you in deciding if an attack is happening and what to do.
Multiple computers flood a target with traffic or requests in a DDoS assault. This can overload the target and cause it to crash or become unavailable.
DDoS attacks often enable criminals to take down online services, but they can also be effective against smart contracts.
There are several ways to protect against DDoS attacks, but the most important is having a good security plan. This includes having strong passwords, firewalls, and intrusion detection systems.
You should also monitor your network for unusual behavior and prepare a backup plan.
If you suspect a DDoS assault, call your auditors immediately. They’ll assist you in evaluating if the assault was effective and prevent a repeat.
One common type of attack on smart contracts is the Sybil attack. In a Sybil attack, the attacker creates multiple identities to gain control of a system. Criminals can do this by creating multiple accounts, for example.
The attacker can access more resources or information or even take over the system entirely.
Auditors should be aware of these attacks and how to detect them. One way to do this is by looking for patterns in the activity of the participants in the system.
If there are sudden spikes in activity from new accounts, this could be a sign of a Sybil attack. Auditors can also use other methods, such as network analysis, to identify suspicious activity.
If a Sybil attack is suspected, it is vital to take steps to protect the system. This may involve changing security measures or increasing monitoring of the activity of participants. In some cases, temporarily taking the system offline may be necessary to make changes.
A replay attack is a type of attack that a hacker can carry against Smart Contracts. An attacker captures a transaction and replays it later to mislead the system into processing it again.
Hackers can achieve this by altering or transmitting the original transaction many times.
One way to protect against replay attacks is to use a unique identifier for each transaction. You can include a timestamp or random number in the transaction data.
Use a tamper-proof ledger to store all system transactions to prevent replay assaults.
How Can Auditors Identify these Attacks?
During an inquiry, smart contract auditors can spot all the assaults mentioned above. They may recognize modified Smart Contract code or system weaknesses that criminals can exploit.
Additionally, auditors can assist you in determining the risks associated with your Smart Contract. They may also provide advice on how to reduce those risks. Hiring a professional auditor is one of the best ways to protect your Smart Contract from malicious attacks.
Replay attacks are also easy to spot from the point of view of a professional auditor. If someone has been trying to update your Smart Contract’s history, they may be attempting a replay assault.
Auditors can discover a Sybil attack by counting the addresses interacting with your Smart Contract. If there are too many addresses, then it’s likely that someone is trying to use this malicious operation.
Examples of Real-World Attacks on Smart Contracts
In the Ethereum network, many high-profile attacks on smart contracts have caused substantial financial losses for users and investors.
Other notable attacks include the Parity Wallet hack, in which a hacker stole over $30 million worth of Ether. Furthermore, we should mention the Enigma ICO hack, in which a hacker stole over $500,000 worth of Enigma tokens.
Many additional assaults on less well-known smart contracts have garnered less attention.
One such attack is the Compound Finance hack. In this case, a hacker exploited a flaw in the Compound Finance smart contract. The result was the minting of over $80 million worth of COMP tokens.
A hacker exploited a weakness in the bZx protocol to generate $55 million in BZRX tokens.
These are just a few examples of the many attacks on smart contracts. While mass media publicized some of these attacks, others have not received as much attention.
While recent assaults have heightened scrutiny of smart contracts, unscrupulous actors can still exploit several weaknesses.
Wrapping Up – The Importance of Hiring Smart Contract Auditors
Smart Contract auditors can identify all the attacks mentioned above during an investigation. They may recognize modified Smart Contract code or system flaws that hackers can exploit.
Additionally, auditors can help you assess your Smart Contract’s risk and offer suggestions for mitigating those risks. Hiring a competent auditor is one technique to secure your Smart Contract from threats.
It’s important to note that those we mentioned are just a few examples of attacks on smart contracts. Hiring a professional auditor to investigate your Smart Contract for potential vulnerabilities is essential. Doing so can help you avoid becoming the victim of a costly attack.