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Last updated: December 19, 2024

Smart Contract Taxonomy

This taxonomy provides a structured framework for understanding and categorizing smart contracts, specifically focusing on EVM-based blockchains and Solidity. It is intended to aid developers, auditors, and researchers in identifying key areas of functionality, associated risks, and best practices for secure development.

1. Token Contracts

Examples: ERC-20, ERC-721, ERC-1155

  • Description:
    Smart contracts representing fungible, non-fungible, or semi-fungible tokens.
  • Use Cases:
  • Cryptocurrencies and stablecoins (ERC-20).
  • NFTs for digital ownership and collectibles (ERC-721).
  • Multi-token standards (ERC-1155).
  • Key Risks:
  • Incorrect implementation of token standards.
  • Integer overflows/underflows.
  • Lack of proper access control on minting or burning functions.

2. Crowdfunding and Fundraising Contracts

Examples: ICOs, IDOs, IEOs

  • Description:
    Contracts that facilitate the collection of funds in exchange for tokens or other benefits.
  • Use Cases:
  • Initial Coin Offerings (ICOs).
  • Decentralized fundraising on platforms like Uniswap or Balancer.
  • Key Risks:
  • Rug-pulls or misappropriation of funds.
  • Vulnerabilities in refund mechanisms.
  • Failing to secure investor funds in escrow.

3. Governance Contracts

Examples: DAOs, voting mechanisms

  • Description:
    Contracts enabling decentralized governance and decision-making processes.
  • Use Cases:
  • Token-based voting systems for DAOs.
  • Community-driven proposals and execution mechanisms.
  • Key Risks:
  • Voting manipulation (e.g., Sybil attacks).
  • Flawed quorum or proposal execution logic.
  • Lack of on-chain transparency in decision-making.

4. DeFi Protocols

Examples: AMMs, Lending, Yield Aggregators

  • Description:
    Financial services provided via smart contracts without intermediaries.
  • Use Cases:
  • Automated Market Makers (e.g., Uniswap, SushiSwap).
  • Decentralized lending/borrowing platforms (e.g., Aave, Compound).
  • Yield farming and liquidity mining (e.g., Yearn Finance).
  • Key Risks:
  • Impermanent loss in AMMs.
  • Exploitable liquidation mechanics in lending platforms.
  • Flash loan-based attacks on arbitrage opportunities.

5. Oracle Contracts

  • Description:
    Contracts fetching off-chain data to use in on-chain operations.
  • Use Cases:
  • Price feeds for DeFi protocols.
  • Real-world event triggers for smart contracts.
  • Key Risks:
  • Price manipulation attacks.
  • Delayed or incorrect data delivery.
  • Centralization risks in oracle mechanisms.

6. Escrow and Payment Contracts

  • Description:
    Contracts managing funds between parties, releasing them based on predefined conditions.
  • Use Cases:
  • Secure peer-to-peer transactions.
  • Conditional payments for services or goods.
  • Key Risks:
  • Logic errors leading to incorrect fund releases.
  • Lack of multi-sig protection in disputes.
  • Malicious actors exploiting refund or lockup conditions.

7. Lottery and Gambling Contracts

  • Description:
    Contracts providing randomness-based services, such as lotteries or casino games.
  • Use Cases:
  • Decentralized lotteries.
  • On-chain games of chance.
  • Key Risks:
  • Manipulation of randomness sources (e.g., block hashes).
  • Front-running attacks in prize distributions.
  • Regulatory compliance issues.

8. Identity and Access Management

  • Description:
    Contracts that verify user identities and manage access control.
  • Use Cases:
  • Decentralized identity solutions (DID).
  • Role-based access systems in DAOs.
  • Key Risks:
  • Unauthorized privilege escalation.
  • Mishandling of sensitive user data.

9. Bridge Contracts

Examples: Cross-chain bridges

  • Description:
    Contracts facilitating asset or data transfers between blockchains.
  • Use Cases:
  • Bridging tokens across L1s and L2s (e.g., Ethereum ↔ Arbitrum).
  • Enabling interoperability between blockchains.
  • Key Risks:
  • Replay attacks.
  • Exploits in validator or relayer systems.
  • Loss of funds during cross-chain transfers.

10. Supply Chain and Logistics Contracts

  • Description:
    Contracts managing supply chain operations or tracking logistics.
  • Use Cases:
  • Verifying product authenticity.
  • Tracking shipments across supply chains.
  • Key Risks:
  • Dependence on external data integrity.
  • Incorrect implementation of audit trails.

11. Gaming and Metaverse Contracts

  • Description:
    Contracts supporting blockchain-based games or virtual worlds.
  • Use Cases:
  • On-chain asset ownership (NFTs).
  • In-game economies using tokens.
  • Key Risks:
  • Vulnerabilities in in-game tokenomics.
  • Exploits in trade or auction mechanisms.

12. Security Tools and Audit Enablers

Examples: Multisig wallets, time locks

  • Description:
    Contracts providing additional layers of security or facilitating audits.
  • Use Cases:
  • Multi-signature wallets for secure asset custody.
  • Timelocks for deferred execution of sensitive operations.
  • Key Risks:
  • Misconfigured access controls.
  • Logic errors in time-based operations.

13. Arbitrage and MEV Bots

  • Description:
    Contracts designed for exploiting arbitrage opportunities or MEV (Maximal Extractable Value).
  • Use Cases:
  • On-chain arbitrage trading.
  • Gas optimization and priority mechanisms.
  • Key Risks:
  • Front-running or sandwich attacks on users.
  • Exploitation of network congestion.

This taxonomy helps categorize the diverse applications of Solidity and EVM-based contracts, ensuring that each category is analyzed for its unique security challenges and development requirements. By understanding these categories, developers can adopt best practices and mitigate risks effectively.