The Importance of an Audit for Cryptocurrency Projects

Smart code audits are essential when considering the Ethereum chain split in 2016 because of a code vulnerability. An attacker exploited a "recursive call bug" to drain hundreds of millions of dollars from Ethereum (ETH) in the decentralized autonomous organization (DAO) hedge fund. Millions of dollars were at risk. Subsequent community discussion about whether to return the funds forcibly triggered a hard fork.

With this in mind, and as part of its continuous effort to manage and mitigate risk, HZM engaged Certik to conduct an HZM token audit. The primary focus of the HZM Coin audit is to ensure compliance and security are implemented tightly in the token. The audit identified vulnerabilities and gave fix recommendations.

Third-party token audits provide an independent view of token projects. In addition, they assess code weaknesses, which might lead to rug pulls or other frauds in a project. Audits should not be seen as a green light on cryptocurrencies but as part of a due diligence process.

Is it necessary to audit smart contracts?

Smart contracts are attractive targets for malicious attacks from hackers because they exchange vast amounts of value. A small coding error could lead to huge losses. According to reports, the DAO hack on the Ethereum blockchain resulted in the loss of roughly 60 million dollars in ETH. Because of the irreversible nature of blockchain transactions, a project's code must be secure.

The secure nature of blockchain technology makes it hard to recover funds and resolve issues afterward, so it's always better to work to prevent weaknesses from happening in the first place.

There is a reason smart contract audit services are popular. An essential step for any DeFi product creator is to identify vulnerabilities and bugs in their contract. Anyone, including developers, ICO startups, DeFi developers, and owners of decentralized applications, can benefit from smart-contract audits. Thus, you prevent the possibility of losing your users' funds.

The HZM Coin audit paid particular attention to these factors:

  • Evaluating both common and uncommon attack vectors against smart contracts.
  • Ensure that the codebase complies with best practices and standards.
  • Ensure contract logic complies with client specifications and intentions.
  • Comparison of contract structure and implementation with similar smart contracts by industry leaders.
  • An expert review of the entire codebase line-by-line.

Security assessments resulted in findings ranging from critical to informational. To ensure high-security standards and industry practices, some security recommendations that could benefit the HZM coin project are:

  • Improving the source code structure with better coding practices.
  • To cover all potential use cases, add enough unit tests.
  • Add more comments to each function to improve readability, especially when public contracts are involved.
  • Once the protocol goes live, provide more transparency on privileged activities.

Following the above recommendations and findings, auditing Cryptocurrency has more benefits, including;

  • Because of their irreversible nature, smart contract audits allow a project to locate previously unnoticed security vulnerabilities in its code. Professional auditors like Certik have deep experience working with code and, therefore, can spot flaws that appear to be in fully secure code.
  • By auditing cryptocurrencies, a project can eliminate issues that would enable malicious actors to mint tokens without authorization.
  • Upon completing a smart contract audit, the auditors provide a report to a client stating all the vulnerabilities found and their severity level, such as the one above. So, a client can eliminate the most critical and severe problems first.
  • In general, crypto token audits confirm a project's credibility for investors and potential partners and position a project as a trustworthy partner.
  • Decentralized Finance (DeFi) ecosystems often conduct smart contract security audits. A smart contract code review might have been one factor in your decision to invest in a blockchain project.

What you will find in a crypto audit?

Smart contract auditors audit in two ways: manual or automatic audits. Manual auditing involves examining each line of code for compilation and re-entry errors, which can help identify other underestimated security issues. Automated security analysis follows a sophisticated approach to penetration testing and helps find vulnerabilities much faster.

A professional crypto audit uses automated tools to identify vulnerabilities that are common knowledge. Then follows a systematic and structured code review of a blockchain project. Crypto audits aim to detect high-severity bugs in code.

For example, the security intelligence process under the Certik Skynet Trust score ranked the HZM coin at an excellent 80/100. The index measures a crypto project's market performance, social sentiment, and relative security.

With a score of 80/100, the HZM token is safe. At a good 89/100 points in the market and social community, the Arab coin is in good shape. Identifying the system's key components is the first step of an audit by a crypto audit company. It involves understanding the target system's architecture, use-case scenarios, and critical components.

The critical phase of blockchain audits is threat modeling, which reveals data spoofing and data tempering and allows the detection of DDoS attacks on blockchains. Last, a crypto audit assesses the scope of potential threats to a project under test and their further mitigation once the vulnerabilities surface.

What Should the Auditors Check?

A project auditor's key role is to locate errors and vulnerabilities that may affect the project's control or finances. Centralization is the most common issue auditors run into and is a massive topic of discussion in the cryptocurrency community. From an operational standpoint, centralization has some benefits but contradicts DeFi's ethos by introducing a single point of failure. Many rugs pull exploit these centralized privileges.

The Certik HZM coin's audit, dated 26/05/2022, presented an opportunity for centralized privileges to mint an unlimited number of new tokens. HZM acknowledged this important vulnerability in the report to avoid abuse of privileges.

Centralization problems and liquidity lockups are easy to spot, but granular code errors and vulnerabilities are more difficult to detect. Developers should spend time and money on a proper audit to avoid losing vast amounts of money to the forked Uniswap code.

Are Smart Contract Audits Accurate?

New investors need to be aware of the potential dangers of a high score. A few common misconceptions surround audits as well. An audit report surfaces potential warnings about the smart contract and suggests remediations to project owners. The owner can choose to do these remediations or not and maliciously exploit them later.

In HZM's case, Certik highlighted the function that the project owner can exploit the loophole and harm investors. That function also exists in other smart contracts, where it hasn't been exploited and has been used to improve the contract's functionality.

That said, given the rapid growth in the cryptocurrency world, we can only advise investors to work with audited projects like the HZM coin. As embodied by the iconic camel, HZM symbolizes a legendary journey, the ability to recover energy and persevere. Join the Arabian Coin journey.