Transparency and security are keywords in cryptocurrency. The May and June contagion crisis is a prime example of cryptocurrency’s shortcomings. Companies like Celsius and Voyager Digital, which have filed for bankruptcy, have made highly risky bets with customer assets. This is all very well if customers are aware of the process, but the problem arises when everything is done behind closed doors – as it was. Customers of these companies now face lengthy bankruptcy proceedings – which will likely take years – to recover some of their assets, with nothing guaranteed. If these same clients could adequately assess the risks they were taking, it is likely that a party would not have chosen these platforms to invest. Security is another keyword. Especially since many of us don’t have the immense technical knowledge needed to assess the ins and outs of blockchain technology and make an assessment of the security of a dApp, this is an area that many have reservations about. Fantom, the Tier 1 blockchain platform, aims to increase the security of your business and has an interesting method to help with that. Today announced the deployment of Watchdog, a smart contract security analyzer, which will automatically audit decentralized applications (dApps) launched on the Fantom Mainnet for vulnerabilities. Despite the need for audits, the costs associated with the process are high. Companies offering smart contract auditing services charge thousands, with fees as high as $500,000 depending on the size and complexity of the code. As a result, an increasing number of projects have had to choose between opting for a smart contract audit or dedicating financial resources to alternative options. This is Watchdog’s target market, therefore. It aims to provide a tool that continuously monitors smart contracts on the blockchain. Since deploying on Ethereum, Watchdog has saved hundreds of millions of vulnerable funds and made nine notable public disclosures. Fantom announcing the Watchdog partnership is an intriguing development and one that caught my eye. I interviewed Fantom CEO Michael Kong – who also appeared on the CoinJournal podcast recently – to get his thoughts on some questions I had.
CoinJournal (CJ): How important is proper auditing and increased transparency for cryptocurrency as a whole as it waits to continue to establish itself in the mainstream financial landscape?
Michael Kong (MK): Smart contract security should be the number one priority for any developer. Both should be considered mission critical software where errors or bugs are not an option. This is because smart contracts can contain millions or, in some cases, billions of dollars worth of cryptocurrencies, and even a single mistake can lead to the loss or theft of funds. According to ImmuneFi, a smart contract auditing firm, losses in Decentralized Finance (DeFi) applications exceeded $1.8 billion from January to July 2022. Cryptocurrencies cannot become mainstream until these security issues are resolved. titles are corrected. Fortunately, there are many new developments taking place that should reduce the number of losses.
CJ: Do you think part of the reason auditing is so expensive right now is because the technical knowledge required is so specific and complex?
MK: Yup. As smart contract security is a difficult field, the number of people with the technical expertise to properly review a smart contract is limited, while the number of smart contracts to be reviewed continues to grow. This means that audits can often take weeks or even longer to complete, and are a huge development cost.
CJ: Was this move to deploy Watchdog driven by Fantom users, or is this a management-driven decision?
MK: Both. There has always been a lot of demand for tools that can increase the security of smart contracts by the community, but the foundation also recognizes their importance as our experience has been in developing tools to analyze smart contracts. Watchdog automatically reviews smart contracts, potentially reducing instances of losses, as well as reducing the time and cost of reviewing each individual contract. Watchdog therefore represents another layer of security on the Fantom platform.
CJ: With Watchdog monitoring all contracts with a total locked value (TVL) of $10 million or more, is there still a chance that vulnerabilities may exist for smaller contracts? And would it be worth a bad actor’s time to pursue it?
MK: It is impossible to prove that a smart contract will never have an attacker. However, Watchdog will play an important role in verifying contracts across a wide range of potential attacks. This will include many contracts that do not necessarily have a TVL of $10 million, and we encourage any project that wants to use Watchdog to contact the Foundation. However, a major focus has been on projects with high TVL, as these are the contracts that have the most to lose.
CJ: Many people use crypto with the image that it is a western industry with a complete lack of transparency. Do you think these people are right or is the industry on the right track with innovations like these to minimize these hacks and security issues?
MK: One of the advantages of public blockchains is that they have a complete audit trail from the first transaction to the most recent one. A developer can publicly verify the original source code of their deployed smart contract, which means it’s completely transparent for anyone to review. However, there are still many smart contracts that are hacked, either because individuals are unable to do their own due diligence or because the attack was complicated and subtle but devastating. However, tools like Watchdog should help developers create secure smart contracts.
CJ: What would you say to cryptocurrency users who haven’t used Fantom before but are considering getting involved?
MK: Developing on Fantom is very similar to Ethereum, but transactions are confirmed much faster and much cheaper. While a smart contract transaction can cost $50 on Ethereum, the equivalent on Fantom can be $0.50. This is because Fantom has a unique consensus protocol that allows transactions to be confirmed asynchronously (ie multiple transactions are confirmed simultaneously) and only one block confirmation is required for completion. Please go to docs.fantom.foundation to get started.
