Needless to say, the cryptocurrency industry is here to stay, despite all the risks– over $40Bn crypto assets within the DeFi ecosystem point toward this fact. Home to more than $4B worth of user assets, the top four DeFi protocols (Oasis, Lido, Uniswap V2, and Aave) are also the most favorite destinations for high-profile hacking exploits.
This is surely hitting the industry hard and could derail the ambition of evolving as a viable and reliable alternative to traditional financial services.
It is observed that some hacks happen due to lax security measures and the malicious attempts of hackers on the personal keys of the users. However, most of the funds that leak are because of security vulnerabilities in the smart contracts–that power this volatile industry.
These security breaches can be for any reason– a coding error, external price manipulation, etc., but the result is the same–draining millions of dollars and resulting in despair for the users. This is why one must not think much about the smart contract audit cost when it comes to getting your contracts audited. It’s a crucial process; therefore, ensure you get it done by the best experts.
As long as the vulnerabilities persist, DeFi will remain a tempting target for hackers.
How Do Smart Contract Hacks Happen?
Before understanding more about the reaction, and solutions that the community has found against smart contract hacks, let us talk about the steps that a hacker takes to exploit the vulnerability in the smart contract.
Following are the steps of hacking a smart contract.
- Analyze the source code
- Understanding the vulnerability
- Local exploitation
- Beginning with remote exploitation
Hackers follow these steps to find the vulnerability in the smart contracts and then exploit them to hack and leak the funds. Now, we are in a position to proceed with the reactions and solutions for these hacks.
How Has The Industry Responded To The Smart Contract Hacks?
By now, you would have understood that smart contracts can easily be hacked if we don’t fix the bugs in the early stages itself. Let’s see how the industry has responded to such hack attacks.
The DeFi industry is up and moving to solve the problems of these recurring hacks– be it by establishing and maintaining the best security practices for the developers, offering recommendations for them, underlying the blockchain principles, or providing software to identify the security breaches in the smart contracts.
Today, so many organizations have come up with software for reviewing the codes of smart contracts, smart contract audit protocols, and more.
Rethinking About Smart Contract Hacks
While the world of crypto goes topsy-turvy under the burden of smart contract hacks, some companies do not throw in the towel. Instead, they aim to reinvent the working of smart contracts, resulting in cutting the vulnerability risks short so that they do not creep into the code.
One of the things that companies are doing today is that they are ending their dependency on Solidity and Ethereum Virtual Machine and adapting to an alternative DeFi infrastructure. Rather than relying on traditional smart contracts, some companies build their DeFi apps using “components”.
What could be the reason for doing it? Well, it makes designing and analyzing decentralized applications much easier and makes their behavior predictable and easy to understand. Developers can conveniently customize the components as well as add more components to build new functionalities to power the dApps.
It’s obvious that the community scrutinizes and reuses the components over and again, their security is far more robust than traditional smart contracts. If all the components will be working as expected, then the transaction will be successful, else, if any of the components fail, the transaction will be aborted completely and user funds will remain safe in their wallets.
A Step Towards A Smarter Future
With the ever-increasing popularity and fame of cryptocurrency, it is speculated that more and more funds will get poured into the DeFi realm shortly. So, developers cannot overlook the menace that smart contract vulnerabilities will have on the community if they wish to stay away from such massive hacks. As a result, they cannot persist with unreliable development paradigms that have been used in the past.
In this situation, the companies that work towards improving the security of the contracts are a relief! If the new and alternative DeFi that companies want to launch gets launched, it will benefit the users as well as the developers. One of the facts that are getting the most traction here is the need to be more stringent with the code of the smart contracts as a developer.
There is a pressing need to move towards a smarter future by ensuring that the smart contract code is already smart to be able to dodge the threat of hack attacks.