The Audit Advantage and Why Verified Blockchains Lead the Pack
The impact of security breaches is an essential consideration in the context of blockchain audits. Statistics from SlowMist show 223 security incidents in the first half of 2024, culminating in losses of $1.43 billion. This is up by 55.43% from the first half of 2023, when 185 incidents occurred, incurring $920 million in losses.
The losses from breaches slowed down in the second half of the year. There have been 382 blockchain hacks so far in 2024, with total losses exceeding $2 billion at the time of writing.
Blockchain security audits reduce the risk of smart contract vulnerabilities. They are a continuous process as code undergoes frequent forks and updates. More than a one-time security audit is required as an adequate measure for long-term security.
Cosmos leads the pack
Ethereum experienced the highest losses of all blockchains in the first half of 2024, reaching $400 million. Arbitrum and Blast came next with approximately $72.46 million and $70 million, respectively. Binance Smart Chain suffered losses of about $32.12 million, but it reported 57 security incidents, the most of all blockchains.
As of December 2024, there were no publicly reported incidents of the Cosmos blockchain suffering direct financial losses due to hacks this year. This is precisely due to commendable initiatives in the area of blockchain auditing. In an aim to further reduce the risk of exploits, enhance security, and safeguard staked ATOM, Atom Accelerator DAO initiated a partnership to address the absence of formal audits of some key Cosmos dependencies as well as the chaotic audits of new functionality on the Hub. Zellic became a long-term audit partner for the Cosmos Hub after Atom Accelerator ran a request for proposal (RFP). Atom Accelerator also engaged Zellic to audit the Liquid Staking Module. Zellic plans to carry out full-scale security audits of Cosmos Hub features and upgrades over the next two years. Among the dependencies the platform will review are CosmWasm, a smart contracting platform built for the Cosmos ecosystem, and Cosmos SDK. The first operations will cover Cosmos Hub binary Gaia in the first half of 2025. They will prioritize other dependencies based on risk.
The Cosmos Hub spent close to $330,000 on one-off audits in the past year and a half, without audits of dependencies. Zellic’s 20 audit-week contract with Atom Accelerator will cost 16% less per audit-week.
The improved security resulting from the audits is expected to attract even more developers and projects to Cosmos, increasing ATOM value and use cases. Ultimately, these operations will augment Cosmos’s long-term stability and user confidence, protecting both its assets and reputation.
The newest threats to blockchain security
Attention to CosmWasm is warranted as flaws in smart contract code continue to be a primary target for attackers in 2024. Exploiting these vulnerabilities can lead to substantial financial losses and undermine trust in decentralized applications. Rigorous code audits and secure development practices are essential to mitigate these risks.
Advanced Persistent Threats, or APTs, are another prominent threat. State-sponsored hacking groups have intensified efforts to infiltrate blockchain networks. For instance, Chinese hackers calling themselves Salt Typhoon have compromised mobile networks, accessing sensitive data and communications. Such breaches pose significant risks to the integrity and confidentiality of blockchain systems.
Cybercriminals employ sophisticated social engineering tactics to trick individuals into revealing private keys or sensitive information. These methods often involve impersonating trusted entities or creating fraudulent applications to lure victims.
Advancements in quantum computing pose potential risks to blockchain cryptography. Quantum computers could, in theory, break the cryptographic algorithms that secure blockchain networks.
Compromising third-party components or modules within the blockchain ecosystem can introduce vulnerabilities. Ensuring the integrity of all integrated elements is crucial to prevent such attacks.
The latest tools in blockchain audits
Smart contract audit tools identify and remedy potential vulnerabilities by meticulously analyzing the code that governs the contracts. These auditing tools operate through methods such as static code and dynamic analysis, formal verification, and fuzz testing. Static code analysis involves examining but not executing code. The audit tools scan the codebase for familiar patterns, potential vulnerabilities, and coding practices. They look for improper access control, integer overflows, reentrancy attacks, and other common issues. Tools like Mythril and Slither use static analysis to gain insights into potential vulnerabilities and risks in Ethereum smart contracts.
Dynamic analysis involves observing a smart contract’s behavior in real time by executing it in a controlled environment. This technique helps identify unexpected behaviors and runtime errors that static analysis might miss. Dynamic analysis tools test different scenarios to see how the smart contract responds.
Taking smart contract audits a step further, formal verification proves the correctness of a smart contract’s logic mathematically. It achieves this by creating formal proofs to make sure that the smart contract operates as intended in all settings and environments.
Fuzz testing is applied to uncover unanticipated inputs and edge cases that could break a smart contract. Auditing tools test the contract’s resilience by generating random or semi-random inputs. This method helps identify risks that might arise from rare or extreme inputs.
Once the audit is complete, the tools generate detailed reports of potential security issues and code vulnerabilities. The reports often include recommendations for rectification, severity ratings, and code snippets illustrating the issues. Reliable, modern smart contract audit tools also provide actionable insights.