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At the end of 2023, the global smart contract market is expected to reach approximately 300 million USD. Smart contracts are useful for peer to peer transactions in blockchains. They are also helpful for trade finance, insurance to improve claim processing, stock taking, and record keeping.
Much as these blockchain applications are useful in various industries, they may not always be safe and are prone to attacks. The effects of smart contract attacks are very devastating and can cause significant losses to a project’s investors.
This article will address various vulnerabilities in smart contracts, how they occur, and their effects on smart contracts. We will also highlight how to mitigate these smart contract vulnerabilities.
Common Smart Contract Vulnerabilities
A reentrancy attack is any procedure which, in its execution, can be interrupted in the middle, reentered, and the previous and the latter functions continue to the end. Therefore, a reentrancy attack occurs when an untrusted external force, known as an attacker, repetitively calls its targets’ withdrawal function.
The contract does not automatically update the account balance and recurs the withdraw function until it is washed clean. The attacker manipulates the withdraw function and associates it with their smart contract that recursively withdraws the amounts. Reentrancy attacks completely drain ether from your smart contract and interfere with your contracts.
Reentrancy attacks can be mitigated by ensuring the contract is updated before adding another contract. This vulnerability can also be avoided by understanding the difference between call, transfer, and send function since attackers only maximize those.
This smart contract vulnerability can also be mitigated by marking all untrusted functions and by using a mutex. Mutex locks the contract on its state, with only the contract owner being able to edit.
Denial Of Service Attacks
A DOS attack is meant to stop the services of the host to the client. Untrusted external contracts also play a significant role in DOS attacks. DOS attack in ether occurs when transactions are stopped due to system failures. The attacker may overload the target computer with many requests that the target cannot handle and can’t serve its clients.
In September 2016, two DOS attacks were conducted on the Ether networks to slow down the processes. When a contract tries to do a refund, it reverts. When this happens, criminals can become leaders by ensuring that all transactions to them fail. DoS attacks to slow down the operation of a contract. They also lead to system failure and chain transaction failures.
This vulnerability can be mitigated by avoiding making contracts with untrusted parties. DoS attacks can also be prevented by using pull payments instead of push payments and using software-defined networking for configuring rules to block any DOS attacks.
It’s the maximum amount that a smart contract owner is willing to pay to process his/ her payments. If at any point, they exceed the gas limit, the transaction fails. An attacker can take advantage of this by sending DOS attacks. This attack will stop a chain of other operations in line.
The main effect of gas limit vulnerability is the slowing down of all transactions. The gas limit vulnerability can be mitigated by setting higher limits to make faster processing of your transactions by miners.
Frontrunning is overtaking an unconfirmed blockchain transaction. Frontrunning occurs due to blockchain’s transparency property. Unconfirmed blockchain transactions are visible in mempool, but that is only before the miner includes them in a block.
Transactions in mempool can be easily monitored by interested parties and can be overtaken by paying higher transaction fees. For developers to mitigate against frontrunning, they need to redesign the blockchain.
Smart contracts generally express numbers as integers because they do not have floating-point support. When integers represent values in smart contracts, one must step down to small units. Stepping down to small units when using integers is vital to allow for accuracy.
Expressing integers in small units may cause the integers to overflow. When done wrongly, integer arithmetic may lead to a lack of precision. Developers can mitigate their code from this smart contract vulnerability by using safe math libraries.
Other Logic Bugs
Logic bug errors may result from simple typing errors, misunderstanding of the specification, or a programming mistake. These logic bugs negatively affect the functionality and the security of a smart contract.
This smart contract vulnerability can be mitigated if you understand the contract’s specifications and insight into the project’s intended functionality. The issue can also be corrected when you thoroughly understand the code base of the transaction.
These vulnerabilities have made many smart contract projects to lose a lot of money. Constant loss of funds in smart contracts have made these projects aware of the need to take security seriously. Developers, therefore, need to employ vital tools that will mitigate against these smart contract vulnerabilities. The thorough auditing of smart contracts is also critical to help identify any weaknesses and rectify them.
There are so many other vulnerabilities that could lead to a project’s downfall. However, knowing these common ones and how to prevent them can go a long way in helping developers ensure the success of their smart contract projects.