Blockchain Security: Smart Contract Auditing, DeFi Exploits, and Wallet Safety

Part of the Cybersecurity Skills Guide — This article is one deep-dive in our complete guide series.

By HADESS Team | February 28, 2026 | Updated: February 28, 2026 | 5 min read

Blockchain security is a distinct specialization where code flaws are permanent and financial losses are immediate. There is no “patch Tuesday” for a smart contract that has already been exploited. The immutable, transparent, and financially loaded nature of blockchain systems creates an attack surface unlike traditional software.

Smart Contract Auditing

Smart contract audits combine code review with financial logic analysis. You need to understand both the programming language (Solidity, Rust, Move) and the economic incentives that motivate attackers.

Manual review focuses on:

• Access control — who can call privileged functions? Are there missing onlyOwner modifiers?
• State management — can contract state be manipulated into an inconsistent condition?
• External calls — does the contract call untrusted addresses? In what order do state changes and external calls occur?
• Mathematical operations — integer overflow/underflow, precision loss in division, rounding errors that accumulate

Automated tools catch common patterns:

• Slither (static analysis) identifies reentrancy, unused variables, and access control issues
• Mythril (symbolic execution) explores execution paths and finds assertion violations
• Echidna (fuzzing) tests contract invariants with random inputs

Tools miss business logic flaws. A token contract might be technically correct but economically exploitable through oracle manipulation or governance attacks. Manual review by someone who understands DeFi mechanics remains necessary.

DeFi Exploits

DeFi exploits follow recurring patterns:

Flash loan attacks borrow large amounts without collateral, manipulate prices or governance within a single transaction, and repay the loan. The attacker needs no capital — only knowledge of how to chain protocol interactions.

A typical flow: borrow millions in a flash loan, use the borrowed funds to manipulate an AMM price oracle, exploit a lending protocol that relies on that oracle for collateral valuation, profit from the mispriced positions, repay the flash loan.

Oracle manipulation targets protocols that rely on on-chain price data. Spot prices from AMMs can be moved within a single transaction. Time-weighted average prices (TWAPs) and Chainlink price feeds are more resistant but not immune.

Reentrancy occurs when a contract makes an external call before updating its state. The called contract calls back into the original, re-entering a function before the first invocation completes. The classic DAO hack used this pattern. Defense: follow the checks-effects-interactions pattern — update state before making external calls.

Governance attacks exploit voting mechanisms. An attacker acquires enough governance tokens (potentially through a flash loan) to pass a malicious proposal. Some protocols have time locks and minimum quorums, but small-cap protocols with low voter participation are vulnerable.

Consensus Attacks

51% attacks occur when an attacker controls more than half of a proof-of-work network’s hash rate, enabling double-spend attacks through chain reorganization. Smaller PoW chains with low hash rates are targets — ETC has suffered multiple 51% attacks.

Validator collusion in proof-of-stake systems is the equivalent risk. Economic incentives (slashing penalties) deter this, but coordinated validators could still censor transactions or perform short-range reorganizations.

MEV (Maximal Extractable Value) extraction allows block producers to reorder, insert, or censor transactions for profit. Sandwich attacks front-run and back-run user trades, extracting value from price slippage. MEV is technically not an exploit — it is a design consequence of transparent mempools — but it harms users.

Wallet Security

Private key management is the foundation. Hardware wallets (Ledger, Trezor) store keys in secure elements that never expose the raw key. Software wallets are only as secure as the device they run on.

Seed phrase security — 12 or 24 words that derive all keys. Store on metal (not paper), in multiple secure locations, never digitally. Attackers who obtain the seed phrase control all associated funds.

Approval management — ERC-20 token approvals grant contracts permission to spend tokens. Unlimited approvals (type(uint256).max) persist until revoked. A compromised or malicious contract with an active approval can drain tokens at any time. Review and revoke unnecessary approvals regularly using tools like revoke.cash.

Related Career Paths

Blockchain security maps to the Security Researcher career path. This specialization requires a combination of traditional code review skills and deep understanding of financial protocols.

Next Steps

• Evaluate your blockchain security knowledge with the skills assessment
• Browse the skills library for cryptography and smart contract topics
• Explore specialized job listings in blockchain and DeFi security

Related Guides in This Series

• Applied Cryptography: Algorithms, TLS, Key Management, and Common Pitfalls
• eBPF Security: Kernel-Level Monitoring, Network Filtering, and Runtime Protection
• Smart Contract Security: Solidity Vulnerabilities, Reentrancy, and Auditing

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Frequently Asked Questions

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HADESS Team consists of cybersecurity practitioners, hiring managers, and career strategists who have collectively spent 50+ years in the field.