The Dedaub Watchdog Service

The Dedaub Watchdog is a technology-driven continuous auditing service for smart contracts.

What does this even mean? “Technology-driven”? Is this a buzzword for “automated”? Do you mean I should trust a bot for my security? (You should never trust security to just automated solutions!) And “auditing” means manual inspection, right? Is this really just auditing with tools?

Let’s answer these questions and a few more…

Watchdog brings together four major elements for smart contract security:

• automated, deep static analysis of contract code
• dynamic monitoring of a protocol (all interacting/newly deployed contracts, current on-chain state, past and current transactions)
• statistical learning over code patterns in all contracts ever deployed in EVM networks (Ethereum, BSC, Avalanche, Fantom, Polygon, …)
• human inspection of warnings raised.

All continuously updated: if a new vulnerability is discovered, the most natural question is “am I affected?” Watchdog queries are updated to detect this and warn you.

Is it effective? Let’s just say, it is exactly the technology that we have been using internally for a little over a year. It has resulted in many disclosures of vulnerabilities in deployed contracts and 9 high-value bug bounties totaling over $3M. (Bounties by DeFi Saver, Dinngo/Furucombo, Primitive, Armor, Vesper, BT Finance, Harvest, Multichain/Anyswap, Rari/Tribe DAO.)

Analysis

At Dedaub, we have audited thousands of smart contracts, comprising tens of high-value DeFi protocols, numerous libraries and Dapps. Our customers include the Ethereum Foundation, Chainlink, Immunefi, Nexus Mutual, Liquity, DeFi Saver, Yearn, Perpetual, and many more. Since 2018, we’ve been operating contract-library, which continuously decompiles all smart contracts deployed on Ethereum (plus testnets, Polygon, and soon a lot more).

But our background comes from deep program analysis. The Dedaub founders are top researchers in this space, with tens of research publications. (Here are a few recent ones, specifically on our smart contract analysis technology — including the main paper on the technology behind the Watchdog analyses.)

The Watchdog service brings together all our expertise: it captures much of the experience from years of smart contract auditing as highly-precise static analyses. It is an analysis service that goes far beyond the usual linters for mostly-ignorable coding issues. It finds real issues, with high fidelity/precision.

So, what does Watchdog analyze for? There are around 80 analyses at the time of writing, in mid-2022. By the time you read this, there will likely be several more. Here are a few important ones for illustration.

DeFi-specific analyses

• Is there a swap action on a DEX (Uniswap, Sushiswap, etc.) that can be attacker-controlled, with respect to token, timing manipulation, or expected returned amount? Such analyses of the contract code are particularly important to combine with the current state of the blockchain (e.g., liquidity in liquidity pools) for high-value vulnerability warnings. More on that in our “dynamic monitoring”, later.
• Are there callbacks from popular DeFi protocols (e.g., flash loans) that are insufficiently guarded and can trigger sensitive protocol actions?
• Are there protection schemes in major protocols (e.g., Maker) that are used incorrectly (or, more typically, with subtle assumptions that may not hold in the client contract code)?

Cryptographic/permission analyses

• Does a permit check all sensitive arguments?
• Does cryptographic signing follow good practices, such as including the chain id in the signed data? (If not, is the same contract also deployed on testnets/other chains, so that replay attacks are likely?)
• Can an untrusted user control (“taint”) the arguments of highly sensitive operations, such as approve, transfer, or transferFrom? If so, does the contract have actual balances that are vulnerable?

Statistical analyses

• Compare the contract’s external API calls to the same API calls over the entire corpus of deployed contracts. Does the contract do something unusual? E.g., does it allow an external caller to control, say, the second argument of the call, whereas the majority of other contracts that make the same call do not allow such manipulation?
  Such generic, statistical inferences capture a vast array of possible vulnerabilities. These include some we have discussed above: e.g., does the contract use Uniswap, Maker, Curve, and other major protocols correctly? But statistical observations also capture many unknown vulnerabilities, use of less-known protocols, future patterns to arise, etc.

Conventional analyses

• Watchdog certainly analyzes for well-known issues, such as overflow, reentrancy, unbounded loops, wrong use of blockhash entropy, delegatecalls that can be controlled by attackers, etc. The challenge is to make such analyses precise. Our technology does exactly that.

Yet-unknown vulnerabilities

We continuously study every new vulnerability/attack that sees the light of day, and try to derive analyses to add to Watchdog to detect (and possibly generalize) the same vulnerability in different contracts.

Monitoring

No matter how good a code analysis is, it will nearly never become “high-value” on its own. Most of the above analyses become actionable only when combined with the current state of the blockchain(s). We already snuck in a couple of examples earlier. An analysis that checks if a contract allows an untrusted caller to do a transferFrom of other accounts’ funds is much more important for contracts that have allowances from other accounts. A warning that anyone can cause a swap of funds held in the contract is much more important if the contract has sizeable holdings, so that the swap is profitable after tilting the AMM pool. An analysis that checks that a signed message does not include a chain id is much more important for contracts that are found to be deployed on multiple chains.

Combining analysis warnings with the on-chain state of the contract (and of other contracts it interacts with) is precisely the goal of Watchdog, and how it can focus on high-promise, high-value vulnerabilities.

Inspection

Automation is never the final answer for security. Security threats exist exactly because they can arise at so many levels of abstraction: from the logical, protocol, financial level, all the way down to omitting a single token in the code. Only human intelligence can offer enough versatility to recognize the potential for sneaky attacks.

This is why Watchdog is a technology-driven continuous auditing service. It can issue warnings that focus a human’s attention to the most promising parts of the code. By inspecting warnings, the human auditor can determine whether they are likely actionable and escalate to protocol maintainers.

We call Watchdog auditors “custodians”. The custodian of a protocol is not just a code auditor, but the go-to person for all warnings, all contacts to Dedaub and to other security personnel. By subscribing to Watchdog, a project gets its designated custodian who monitors warnings, knows the contact points and how to escalate reports, coordinates with any incident response team (either in place, or ad hoc, either external, or as part of Dedaub services), and ultimately advises on the project’s security needs.

In terms of software alone, Watchdog integrates two ideas to help a custodian inspect and prioritize warnings:

• The concept of protocols: all contracts monitored are grouped into protocols, based on deployers and interactions. Any new contracts that get deployed are automatically grouped into their protocol and monitored. Reports and watchlists are easy to define to match the project’s needs.
• Flexibility in the amount of warnings issued: Watchdog comes with different levels of service. The minimum level gets roughly a couple of hours per week of a custodian’s time. At this level, the custodian will likely only issue the highest-confidence warnings and inspect them very quickly.
  The next level of support, intended to be the middle-of-the-road offering, covers roughly two auditor-days per month. At that level, the custodian can spend significant time, at least every couple of weeks, to inspect a broader range of warnings. Watchdog supports this configurability seamlessly: it lets the custodian select warning kinds and mix them with many filters, to produce an inspection set that is optimal for covering in a given amount of time.

Contact Us … Soon

The Watchdog service has already had a handful of early institutional adopters (such as Nexus Mutual and the Fantom blockchain, both securing multiple protocols). We are currently enhancing our infrastructure and organizational capability, to launch Watchdog to broad availability (for individual protocols and not just institutional clients) by the end of 2022. You will be able to make inquiries and book a demo or live technical presentation with our team on the Dedaub Watchdog page.