Smart Contract Essentials: Avoiding Common Pitfalls

We used to say that something unchangeable, absolute and trustworthy was “written in stone.” But even stone can erode over time (or some ne’er-do-well with a chisel can make their own changes).

As blockchain becomes more prominent, it’s time to replace that well-worn saying with “written in code.” A smart contract has its terms written and executed in code on the blockchain. These agreements can be carried out without any of the parties in the agreement having to trust any other party—the code is responsible for the transaction.

The weakest link in a smart contract, in fact, is the developer who writes the code. It’s up to all of us as developers to make sure we’re following best practices to keep our contracts as trustworthy as the blockchain they’re running on.

Here’s a quick overview of smart contracts and the best practices that keep their trustworthiness “written in code.”

Smart Contract Essentials

It’s easy to see the advantages of a smart contract when you compare it with the alternative. Imagine your typical real estate transaction, for a good example. This type of legal transfer typically involves an escrow service, two real estate agents, and an army of lawyers should either party fail to live up to their obligations.

That’s a lot of people to trust and a lot of points of failure. By contrast, smart contracts have the agreement’s terms directly embedded in the code. The agreement is self-executing and self-enforcing.

Smart contracts work because they are:

• Immutable. Once a smart contract is deployed, it’s virtually impossible to change except for what is explicitly set as mutable. The code is highly resistant to manipulation or fraud. 
• Transparent. Smart contracts are executed on the blockchain, publicly recorded, traceable and accessible to everyone.
• Automated. Smart contracts execute predefined instructions on the blockchain when specific conditions are met. For example, a contract could automatically transfer ownership of an asset as soon as payment is received.‍
• Decentralized. Smart contracts don’t rely on established institutions to function. For example, if your bank went bust, you wouldn’t be able to rely on contracts that the bank was charged with enforcing. Smart contracts work without these central agencies and organizations.

Smart Contracts in Practice

Developers are continually discovering new uses for smart contracts—like processing in-app transactions for a mobile game, as one real-world example. Here are a few other types of transaction that lend themselves easily to smart contracts:

Real Estate

The number of parties involved in real estate, the high asset values of each transaction, and the entities required to execute them, all make real estate a prime target for smart contracts. Self-executing contracts can handle payment, title transfers, and the escrow process with a minimum of human intervention.

Supply Chain Management

Smart contracts are helping streamline supply chain management, reducing the potential for human error and automating tasks like inventory tracking and payment processing. The transparent nature of blockchain transactions can also help companies prove they are meeting sustainability and fair trade goals. The transaction record can prove that raw materials and labor are ethically sourced.

Decentralized Finance

Finance is one area where smart contracts are fully established as a viable alternative to traditional transactions. Users can trade goods and services without an intermediary—a compelling use case, especially for places where financial institutions are crumbling. Smart contracts are especially useful for trading digital assets that traditional banks would have trouble valuating and/or facilitating sales.

Smart Contract Best Practices

The strength and weakness of any smart contract is that it does what it’s programmed to do. Human error can cause a smart contract to fail, act unpredictably, or become vulnerable to bad actors. Follow these best practices to avoid common pitfalls and exploits:

Use Established Libraries

Smart contracts can be prone to security vulnerabilities like integer overflow, improper access control and re-entrancy attacks. One damaging exploit, for example, can trick the contract into repeating transactions, running the same purchase over and over until the buyer runs out of money.

It’s a good idea to rely on fully-vetted and trusted libraries when you’re building contracts. For development on Avalanche, start with our Smart Contract documentation on GitHub. We also recommend libraries like: OpenZeppelin, Chainlink and Solmate. Each of these is designed to work across EVM chains and will mesh well with Avalanche’s efficient and lightweight structure.

Test, Test and Test Again

Poorly-tested contracts may perform unexpectedly (and/or catastrophically) when they’re released into a live environment. It’s important to know how your code will react in standard usage and in potential edge-case scenarios.

Run unit tests, integration tests, stress tests and more with tools like Truffle, Hardhat and Foundry. Make sure you’re testing in both test environments and under real-world conditions on testnets. 

Optimize for Scalability and User Experience

Inefficient code can increase the gas fees needed to execute each transaction. Problems like complex loops, large data structure and unnecessary computations all contribute to bloat that makes contracts expensive to execute.

When you’re debugging and testing, look to eliminate loops that grow as user data accumulates. Try to minimize memory storage use and make sure to employ efficient algorithms (from trusted code libraries, of course). It may also make sense to split one large contract into smaller ones. The goal is to create the minimum viable product that meets users’ needs while staying fast, efficient and cheap to execute.

Use Secure Randomness Generators

Some developers rely on block variables to generate random numbers. This practice is as widespread as it is predictable and ultimately unsafe for your users. Instead, look for secure sources like Chainlink’s VRF (Verifiable Random Function). There are also oracle-based solutions that provide tamper-proof and truly unpredictable randomness.

Follow the Principle of Least Privilege

When a new contract, function or variable is created the developer can assign how reachable that element is to other components from the code. Only give those the permissions they absolutely need. Limit admin controls or use multi-signature wallets or governance mechanisms for critical actions.

Manage Upgradability Safely

No matter how much you follow the best practices, chances of finding some vulnerability in code are never zero. Upgradeable contracts leave an open window to redirect some of the logic to another updated and patched contract. If your contract is upgradable, use patterns like proxy contracts. Avoid storing logic and data in the same contract for easy modularity and implement secure upgrade mechanisms such as time-locks or multi-signature approvals.

How to Avoid Design and Logic Flaws in Smart Contracts

Smart contracts are valuable because they’re secure and efficient. However, the way they’re coded can eliminate those advantages. Complex logic can introduce vulnerabilities and increase gas costs.

Simple contracts are easier to audit and upgrade, as well as more cost-effective to execute. These tips can help keep your contracts simple and elegant:

• Avoid loops that scale with user data. If a loop depends on user inputs, it can ultimately make the transaction unaffordable or even lead to a fail state.
• Minimize reading and writing to storage. Every interaction with the blockchain structure costs gas. Cache values in memory whenever possible, or restructure your logic to reduce the number of state changes.
• Avoid hardcoding values. Use constant or configurable variables whenever possible, in order to keep your contract adaptable and upgradeable.‍
• Keep your conditionals clean. Nested [if] statements create complex conditions that can bloat your code. It’s better to, for instance, create a function that evaluates the current state and returns a Boolean response.

Start Building on Avalanche

Avalanche is making it easier and more cost-effective to build on blockchain. Avalanche9000, our latest upgrade, lowers the cost of entry and simplifies the development process. Check out our Developer Hub to get started.

‍