Smart contracts are self-executing programs deployed on a blockchain. The contracts automatically execute once certain pre-defined conditions are met. They power a variety of decentralized apps, including exchanges, games, social networks, marketplaces, etc.
Smart contracts facilitate a massive flow of digital assets and valuable information, which, unfortunately, makes them a major hacking target. Malicious actors can exploit any little vulnerability to steal funds and valuable data. This article will examine the most common vulnerabilities and how to avoid them when building smart protocols.
Most common smart contract vulnerabilities
1. Reentrancy attacks
This vulnerability allows a malicious actor to repeatedly call a function before the previously called function finishes executing. It happens when the contract code has a function to call another contract’s function but fails to update the user’s balance before executing the function call.
How to prevent it
Developers should follow the “checks-effects-interactions” pattern, which entails executing all state updates before making an external call. You should also implement a feature to disallow making multiple calls to the same function. Likewise, you can restrict the amount of gas available to execute each function to avoid infinite loops.
2. Flash loan attack
A flash loan is a normal feature for decentralized lending protocols and exchanges; it involves a user borrowing a massive sum for a quick transaction and paying it back almost immediately. However, people can abuse flash loans to manipulate the crypto markets for personal gain.
How to prevent it
- You should require significant collateral for users to receive flash loans, reducing the possibility of a malicious actor trying to exploit the feature.
- Limit the size of flash loans users can receive.
3. Integer overflow/underflow
This vulnerability occurs when the result of a transaction exceeds the contract’s maximum or minimum value (overflow for maximum and underflow for minimum). Hackers can exploit this vulnerability to take over the contract and steal funds.
How to prevent it
- Use safe math libraries, e.g., SafeMath, in your code. The library fails and reverts transactions that will result in an overflow or underflow, preventing malicious actors from taking advantage.
4. Access control
Hackers often look out for flaws in a contract’s access control code. Any little flaw can allow a hacker to gain unauthorized access to a contract and exploit it for personal gain.
How to prevent it
- Implement proper access control using the principle of least privilege, i.e., users should only have access to the specific data and resources needed to complete the current task.
- Implement hardy authentication mechanisms to prevent unauthorized access.
5. Denial of Service
Denial of service is an attack wherein a malicious actor tries to overload a contract to disrupt the system. The hacker overwhelms the protocol with too many concurrent transactions or requests to prevent it from functioning normally. This attack can give an opening for the hacker to manipulate certain values for their personal benefit.
How to prevent it
- Require a non-trivial amount of gas fees for each transaction, which increases a potential attacker’s cost of attempting denial of service attacks.
How to identify vulnerabilities
The best way to identify common vulnerabilities is through a smart contract audit. An audit involves a team of blockchain technology and security experts reviewing your contract’s codebase to identify errors and providing suggestions for fixing the identified errors. A thorough audit is necessary to spot security flaws before deploying your protocol for public use.
