Stela Labs: Why Smart Contract Audits Are More Important Than Ever

Stela Labs
4 min readJun 17, 2021

As the DeFi industry continues to develop at an exponential rate, this nascent field is also incredibly vulnerable to malicious intentions. With no “textbook” written about many of the new and cutting-edge components of this space, projects find it difficult to ensure that their protocols — and their users — are fully protected against hacks and exploits. It seems that as soon as new technology is developed, hackers find a new way to manipulate it.

Thus, security audits are a vital step in the creation of any project making use of smart contracts. Stela Labs is able to optimally deliver these services, thanks to its team’s diverse expertise working in all aspects of the decentralized technology space, in addition to its strong industry connections as a portfolio company of Advanced Blockchain AG, a publicly-traded, international blockchain venture capital and venture building firm.

Through delivering comprehensive smart contract security audits with thorough remediation recommendations, Stela Labs hopes to change DeFi’s reputation for the better, preventing hacks and exploits to make the industry a safer and more reliable space.

DeFi’s Unique Security Vulnerabilities:

As a nascent field, DeFi has not yet been perfected — particularly in the area of code vulnerabilities. Further, regulations of the industry are weak and inconsistent, with no set rules and ramifications for exploiting protocols. This field is also highly valuable, fully digitized, and prioritizes anonymity. Combined, these factors make DeFi a big draw for tech-savvy hackers to make a quick dollar — or more accurately, a quick few million; DeFi hacks totalled $120 million in 2020 alone, with 2021’s numbers only increasing.

The Challenges in Securing a Protocol:

DeFi protocols have found it incredibly difficult to ensure full security on their own. For one thing, there is little research in the area, given its newness. Moreover, developers simply lack the capabilities to ensure complete security of their codes with the standard tools and approaches that they have available. As renowned security auditing firm Trail of Bits discovered after publishing and analyzing the results of nearly 250 of their audits, while 78% of the most severe and exploitable flaws could be detected with automated analysis tools, “almost 50% of findings [from their security auditing firm] are not likely to ever be found by any automated tools”. In other words, the automated tools used by protocols to review their own coding can only identify ¾ of severe issues and ½ of total issues that security auditing firms are able to detect with their approaches.

Protocols’ concerns over ensuring their own security has prompted the introduction of DeFiYield protocol’s DEFIYIELD Safe on June 1, 2021. This is the first-ever web archive of smart contract audits developed in order to aid research in this area, log issues, and prevent similar ones from occurring. Nearly 500 audits have already been added to this database, underscoring both the popularity and need for these audits, in addition to protocols’ desire to learn from others’ mistakes.

Why Security Auditing Firms are the Best Answer:

Despite the fact that more security auditing information has become available publicly, it is still difficult to sort through this massive wealth of information to determine relevance, then to apply this information to a novel code. Not only would this be time and resource intensive for someone who is not fully specialized in the security space, but it also neglects the potential for new issues to arise that have never been identified before. As DeFi sees an unprecedented degree of innovation and creativity, that also means that new issues can arise as new coding is developed.

The best course of action continues to be to have a third-party security audit by a security auditing firm whose team has dedicated their careers to ensuring smart contract protection. This has quickly become the industry standard, and for good reason, given the data supporting this practice. Expert security auditors study past security audits as well as security breaches that have already occurred, merging this with their existing coding skills and a real-world, thorough hacker approach to identifying issues.

The Stela Labs Approach:

Stela Labs in particular is positioned to be a maximally effective security auditing solution. Rooted in experience venture building in the Web 3.0 space from the top-down, this organization’s team has ample experience in the coding and review of Web 3.0 applications, contracts, and infrastructures, with a deep focus on the Ethereum and Polkadot ecosystems, including Substrate. Stela Labs also dedicates a great deal of effort towards research and development in the industry, additionally benefitting from first-hand exposure to the extensive portfolio of new and innovative projects taken on by its parent company Advanced Blockchain AG.

Overall, the security threats to the DeFi field are not going anywhere anytime soon — but the expertise of security auditing firms like Stela Labs vastly improve security to protect users and protocols alike.

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