### BCDV 1013 - Advanced Smart Contract #### Smart Contract Security Audit <div class="author">Dhruvin Parikh, July 2021</div>

### Topics - Goal - Security Audit - Audit Report - Analysis Tools

### Erstwhile * **Smart Contracts** : a decentralized way to enforce digital agreements * **Ethereum** : a blockchain-based Turing complete application platform * Bugs can be (and have been) exploited: hundreds million USD lost

### Ethereum Nodes : * Store account balances, contract code and variables * Execute smart contracts code on request * Maintain a shared view of the global state

Powerful but tricky

### Ethereum Security Challenges : * Decentralized execution environment * New software stack * Very limited ability to patch contracts * Anonymous financially motivated attackers * Rapid pace of development * Suboptimal high-level language

### Classification of issues in Solidity code : * **Security** : directly lead to exploits * **Functional**: violate the intended functionality1 * **Operational** : lead to run-time problems * **Developmental** : make code hard to improve

### Typical issues in Solidity code * Re-entrancy (security) * Locked money (functional) * Costly loop (operational)

### Example 1/3: Re-entrancy * Contract maintains internal list of balances * If a user withdraws funds; their balance is set to zero * Adversary requests withdrawal via malicious contract which calls the victim back before their balance is set to zero, depleting the victim contract’s balance

### Example 1/3: Re-entrancy * Real-world case: The DAO hack (June 2016): $50m lost ``` pragma solidity ^0.4.19; contract Fund { mapping(address => uint) balances; function withdraw() public { if(msg.sender.call.value(balances[msg.sender])()) { balances[msg.sender] = 0 } } } ```

### Example 2/3: Locked money * Contracts that receive ether should have a way to withdraw it: call transfer, send, or call.value * Otherwise money is stuck in contract forever * In which situation money cannot be recovered? * Money locked in <a href="https://etherscan.io/address/0x0000000000000000000000000000000000000000" target="_blank">zero address</a>

### Example 3/3: Costly loop * Ethereum users pay for contract execution with gas * Tx’s are atomic: if one step fails, whole tx fails * Miners enforce a block gas limit (hence, a limit on computation in one tx) * A costly function called inside a long enough loop exceeds block gas limit: tx is never confirmed

### Example 3/3: Costly loop * Example: payouts for all winners in a game fail because of one (maliciously) failing payout ``` for(uint256 i = 0 ; i < array.length; i++) { costlyF(); } ```

The lifecycle of smart contract

Idea 💡

Client requirements

Architecture 📐

Best practices, simulations, design

Develop 💻

Embark,Waffle,Truffle,Hardhat,Visual Studio Code, Remix, MythX

Testing 🧪

Manual + unit testing,Remix plugins, CI, GitHub integration, Code complete

Deploy ⛓

Local,Ganache,Testnets

Audit 📝

Human + machine, business logic

Deploy 🔗

Mainnet

Bug Bounty Programs 🐛

Monitor, detect attacks, new vulnerabilities

### What is security audit? * An assessment of your secure development process. * The best option available to identify subtle vulnerabilities * A systematic method for assessing the quality and security of code.

### Analyze security vulnerabilities process involves: 1. Analyze specifications 1. Run tests 1. Run automated analysis tools 1. Perform manual code audit 1. Create audit report

### The limitations of an audit * Cannot replace internal quality insurance * Cannot overcome excessive complexity or poor architecture * Cannot guarantee no-bugs or vulnerabilities

### The value of audit * Systematic review * Qualitative assessment * Thorough coverage of code in scope

### The value of audit via bug-bounty * Reviews tend to be shallower * Typically identify well known standard bug classes * Rarely identify subtle logic bugs or unspecified behaviour * Requires substantial rewards and promotional effort * Might result in no review at all

### Is audit even needed * Risk? * Code Complexity?

### Before auditing 1. Documentation 1. Easy to run 1. Clean up the code 1. Run a linter 1. Run analysis tools 1. Freeze the code

### Documentation * Describe overall system and its objective * Describe what should not be possible * Lists which contracts are derived/deployed, and how they interact with another * For e.g. <a href="https://github.com/0xProject/0x-protocol-specification/blob/master/v3/v3-specification.md" target="_blank">0x specs</a>

### Easy to run * Make it easy to install and run the tests ``` # Install truffle globally $ npm install --global truffle # install local node deps $ yarn # Testing $ npm run test # windows test $ npm run wintest ```

### Clean up code * Add helpful comments * Resolve TODO/FIXME comments * Delete commented-out blocks of code

### Run analysis tools * <a href="https://github.com/crytic/rattle" target="_blank">Rattle</a> * <a href="https://github.com/consensys/mythril" target="_blank">Mythril</a> * <a href="https://github.com/trailofbits/slither" target="_blank">Slither</a> * <a href="https://github.com/consensys/surya" target="_blank">Surya</a> * <a href="https://github.com/smartdec/smartcheck" target="_blank">Smart Check</a>

### Code Freeze * A moving target cannot be audited

### Audit Report - Typically includes: - Disclaimer - Not guarantee bug free - What was audited, version - Findings - Severity: Critical, High, Low - Recommendations

### Issue Severity - Critical: can cost unlimited amount of users' funds - High: can cost limited amount of users' funds - Low: minor problems or better solutions

### Sample Audit Reports - <a href="https://github.com/EthereumCommonwealth/Auditing/issues/340#issuecomment-524348753" target="blank">Dai Security Audit Report</a> - <a href="https://github.com/OpenZeppelin/openzeppelin-contracts/tree/master/audit" target="blank">OpenZeppelin Security Audit Report</a> - <a href="https://github.com/w3f/polkadot-auction/blob/master/parity-audit-final.pdf" target="_blank">Polkadot sale Audit Report</a> - <a href="https://github.com/sigp/public-audits" target="_blank">Public-audits by Sigma Prime</a> - <a href="https://github.com/bokkypoobah/OneLedgerCrowdsaleContractAudit/tree/master/audit" target="_blank">One Ledger CrowdSale Audit Report</a>

### Security Tools - Static Analyzer in Remix - MythX in Remix or truffle - <a href="https://consensys.github.io/smart-contract-best-practices/security_tools/" target="_blank">Security Tools</a>

### Manual Audit Automatic analysis tools is not reliable, give false positive and miss finding issues; manual auditing is still required

### Audit Checklists A list of common issues is a useful tool for security audit

### Useful Checklists and References - <a href="https://consensys.github.io/smart-contract-best-practices/recommendations/" target="_blank">Consensys Security Best Practices</a> - <a href="https://swcregistry.io" target="_blank">Smart Contract Weakness Classification</a> - <a href="https://blog.sigmaprime.io/solidity-security.html" target="_blank">Solidity Security: known attack vectors and fixes</a> - <a href="https://github.com/ethereum/wiki/wiki/Safety" target="_blank">Ethereum Safety Wiki</a> - <a href="https://medium.com/hashex-blog/how-to-perform-your-first-smart-contract-audit-3d6883f44924" target="_blank">Smart contract security audit</a> - <a href="https://blockgeeks.com/guides/audit-smart-contract/#_The_Steps_for_a_Full_Smart_Contract_Audit" target="_blank">Blockgeeks Security Audit Checklists</a> - <a href="https://ethernaut.openzeppelin.com/level/0xdf51a9e8ce57e7787e4a27dd19880fd7106b9a5c" target="_blank">Ethernaut Contract Hacking Game</a>

### Check for Warnings - Any compiler or analysis tool warnings? - Warnings could be - false positive - bug - `==` should be `=` <img src="./warning.png"></img>

### Testing - Any test failures? - Any function missing tests?

### Code Currency - Use latest solidity compiler? - may have patches for security risks - solidity v0.6.0 changes - array.length-- is not allowed - <a href="https://swcregistry.io/docs/SWC-119#tokensalesol" target="_blank">state variable shadowing</a> not allowed

### External Calls - Is there any state changes after external calls? - Is <a href="https://solidity.readthedocs.io/en/v0.6.4/security-considerations.html#use-the-checks-effects-interactions-pattern" target="_blank">Checks-Effects-Interactions</a> pattern used to avoid re-entrancy issue? - Are errors in external calls <a href="https://www.dasp.co/#item-4" target="_blank">handled properly</a>?

### Denial of Service (DoS) - Do external calls <a href="https://github.com/ethereum/wiki/wiki/Safety#favor-pull-over-push-for-external-calls" target="_blank">favor push over pull</a>? - push: 2 accounts, A pushes to B - pull: 1 account, A pulls from contract - Is <a href="https://medium.com/@jgm.orinoco/why-use-the-withdrawal-pattern-d5255921ca2a" target="_blank">withdrawal</a> pattern being used?

### DoS With Block Gas Limit - Cost of function execution exceeds block gas limit - <a href="https://swcregistry.io/docs/SWC-128#dos_numbersol" target="_blank">Here</a> is an example of modifying large array leads to denial of service attack

### Permission - Functions should have proper permission checking to ensure only the authorized can run the functions - <a href="https://swcregistry.io/docs/SWC-106" target="_blank">Unprotected selfdestruct</a> ``` function kill() public { selfdestruct(msg.sender); } ```

### Failure Handling - Can the contract <a href="https://github.com/ethereum/wiki/wiki/Safety#circuit-breakers-pause-contract-functionality" target="_blank">pause operation</a>? - Can malicious actions be <a href="https://github.com/ethereum/wiki/wiki/Safety#speed-bumps-delay-contract-actions" target="_blank">delayed</a>? - How are fund at risk managed? - Can broken contract be <a href="https://github.com/ethereum/wiki/wiki/Safety#upgrading-broken-contracts" target="_blank">upgraded</a>? - Are users given grace period to upgrade?

### Front Running - Is there <a href="https://consensys.github.io/smart-contract-best-practices/known_attacks/#front-running" target="_blank">transaction ordering dependence</a>? - Insertion attack: ERC20 Approve/TransferFrom - changing approval from 5 to 3 may result in 8 (5 + 3) tokens transfered - work around by approving 5, then 0, then 3

### Overflow - Is there integer wraparound issue? - When arithmetic reaches bound, it wraps - uint8(255) + uint8(1) == 0 - uint8(0) - uint8(1) == 255

### Division - Is there division by zero? - EVM will revert - Is there <a href="https://github.com/ethereum/wiki/wiki/Safety#beware-rounding-with-integer-division" target="_blank">rounding</a> issue?

### Delegate Calls - Is the context used properly? - Will the call cause <a href="https://ethernaut.openzeppelin.com/level/0x68756ad5e1039e4f3b895cfaa16a3a79a5a73c59" target="_blank">change of control</a>?

### Unexpected Contract Balance - Any strict assumption of contract balance? - Ether can be <a href="https://consensys.github.io/smart-contract-best-practices/known_attacks/#forcibly-sending-ether-to-a-contract" target="_blank">forced sent to a contract</a> - Contract can be pre-funded with ether - Attack on this <a href="https://gist.github.com/vasa-develop/415a17c709d804a4d351485cd1b7c981#file-ethergame-sol" target="_blank">example</a> can make claimReward() to always fail

DEMO

Use this directory for smart audit done on some vulnerabilities

Lab

Follow the instructions on the readme file to complete smart contract audit lab

### Smart Contract Security Challenge * <a href="https://ethernaut.openzeppelin.com/" target="_blank">Ethernaut</a> * <a href="https://capturetheether.com/challenges/" target="_blank">Capture the Ether</a> * <a href="https://blog.extropy.io/posts/ctf1.html" target="_blank">Extropy</a> , <a href="http://hack.extropy.io:3000/" target="_blank">Capture the Flag</a> * <a href="https://www.damnvulnerabledefi.xyz/" target="_blank">Damn Vulnerable DeFi</a>

### Smart Contract security audit reports * [MixBytes](https://mixbytes.io/) * [sigma prime](https://github.com/sigp/public-audits) * [Consensys deligence](https://consensys.net/diligence/audits/) * [Open zeppelin](https://blog.openzeppelin.com/security-audits/) * [Trail of bits](https://github.com/trailofbits/publications) * [Quantstamp](https://quantstamp.com/audits) * [SmartDec](https://blog.smartdec.net/) * [Peckshield](https://github.com/peckshield/publications)

## References * [What is sc audit?](https://quantstamp.com/blog/what-is-a-smart-contract-audit)

### Bounty Program - Used to get community to audit code - <a href="https://consensys.github.io/smart-contract-best-practices/bug_bounty_list" target="_blank">Consensys Bug Bounty List</a> - <a href="https://bounty.ethereum.org" target="_blank">Ethereum Bounty Program</a>

### Readings on Parity Bug - <a href="https://etherscan.io/address/0x863df6bfa4469f3ead0be8f9f2aae51c91a907b4#code" target="_blank">Parity Multisig Wallet Source Code</a> - <a href="https://medium.com/@q3693735/parity-bug-c67ecd500347" target="_blank">Parity Bug Explanation</a> - <a href="https://ethereum.stackexchange.com/questions/30128/explanation-of-parity-library-suicide" target="_blank">Parity Bug Stack Exchange Explanation</a>

## End