Why Some Smart Contracts Pass an Audit but Still Get Hacked

Smart contract audits are often seen as a seal of security. If a protocol gets audited, it must be safe, right? - Not exactly.

Time and again, we’ve seen projects that successfully pass an audit yet still fall victim to devastating exploits.

So, why does this happen?

Security isn’t a checkbox. It’s a battle.

Every time a project gets exploited, the same question comes up - “Didn’t they get an audit?”

As if an audit is some golden shield that guarantees safety forever.

But security doesn’t work that way.

Attackers evolve. New vulnerabilities emerge.

The game never stops.

But Why Audited Smart Contracts Still Get Hacked?

Even when a smart contract passes an audit, it can still be hacked because audits are not foolproof. Here’s why:

1. Complexity of Code

Smart contracts aren’t just simple scripts. They often handle intricate financial logic, interact with multiple protocols, and execute a series of automated transactions.

As a result, the more complex a contract is, the harder it becomes to audit thoroughly.

For instance, DeFi protocols involve advanced features like flash loans, liquidity pools, and automated rebalancing mechanisms.

Each of these introduces unique security considerations, such as reentrancy risks, precision errors, and unexpected interactions between contract functions.

Even highly skilled auditors may struggle to map out every possible execution path in such sophisticated contracts, leading to potential blind spots.

The Compound Finance bug in 2021 is a prime example, despite being audited, a minor logic error resulted in over $90M in unintended token distribution.

2. Unforeseen Attack Vectors

The security landscape is constantly evolving.

Attackers develop new strategies, exploit novel techniques, and discover vulnerabilities that weren’t even considered when an audit was performed.

For example, zero-day vulnerabilities, previously unknown security flaws, are a significant risk.

Auditors work with known vulnerabilities and best practices at the time of the audit, but if a new type of attack emerges later, the contract might still be at risk.

Take the Euler Finance hack (2023), despite undergoing multiple audits, the protocol was exploited for $197M using a previously unseen attack vector involving a complex liquidation mechanism.

Some attack vectors arise from off-chain components.

The Bybit $1.5B attack started from a frontend compromise, malicious JavaScript altered underlying contract interactions, allowing attackers to drain funds.

Such attacks aren’t within the scope of typical audits, yet they pose a serious risk.

3. Limitations of Auditing Tools

While automated analysis tools like Slither, Mythril, and Echidna are essential for detecting common vulnerabilities (e.g., reentrancy, integer overflows, access control issues), they aren’t a silver bullet.

Many smart contract exploits involve logic bugs, complex multi-contract interactions, or dependencies that scanners struggle to analyze.

For instance, the Fei Protocol hack (2022), which resulted in $80M in losses, stemmed from an advanced reentrancy attack that bypassed typical detection tools.

Automated tools excel at catching known issues but often fail with:

• Business logic flaws that require deeper manual analysis.
• State-dependent vulnerabilities, where security issues only arise under specific conditions.
• Interactions across multiple smart contracts, which scanners may not fully simulate.

4. Human Error

Security audits rely on skilled professionals, but even the best experts can make mistakes.

Unlike automated tools, human auditors must interpret the logic, assumptions, and behavior of smart contracts. Any misinterpretation can result in missed vulnerabilities.

One of the most infamous cases of human error was the Nomad Bridge hack (2022), where an incorrect initialization setting in the smart contract allowed anyone to withdraw funds. The issue was not caught during audits, resulting in $190M being drained.

Even with multiple audits, human factors such as time constraints, fatigue, and oversight can contribute to vulnerabilities slipping through.

5. Incomplete Testing Scenarios

Audits typically involve rigorous testing, but no test suite can cover every possible real-world interaction.

Attackers thrive on identifying edge cases that weren’t considered during testing.

For example, flash loan attacks manipulate instant liquidity to exploit contracts in ways that might not be tested in standard scenarios.

The bZx attack (2020), which exploited flash loans, was a classic case of an edge case slipping through audits.

Another example is the Beanstalk hack, where a governance loophole enabled a hostile takeover.

The contract itself functioned as designed, but auditors hadn’t anticipated the governance mechanics being used maliciously.

$182M stolen in seconds.

6. Dependency on External Systems

Smart contracts rarely operate in isolation, they interact with oracles, third-party services, and cross-chain bridges.

If any of these dependencies are compromised, even a fully secure smart contract can be at risk.

For example, oracle price manipulation has been a frequent attack vector.

In the Mango Markets exploit, the attacker artificially inflated the price of an asset using an oracle vulnerability, allowing them to drain $114M from the protocol.

Cross-chain bridges are another weak link. The Ronin Bridge hack resulted in $625M stolen because of a compromised validator set rather than an issue in the contract itself.

Audits can’t always account for risks in external dependencies, making them an ongoing security challenge.

7. Rapid Development Cycles

In the Web3 space, projects race to deploy their contracts quickly to stay ahead of competitors, often cutting corners on security.

• Some teams deploy updates after an audit, introducing new vulnerabilities.
• Others push for mainnet deployment before a full security review is completed.
• Auditors sometimes operate under tight deadlines, leading to rushed assessments.

The Ankr exploit happened because of a private key compromise that was unrelated to the contract audit but allowed an attacker to mint unlimited tokens.

This highlights how security isn’t just about code but also operational and infrastructure safeguards.

Off-Chain Attacks are the Silent Killer

When people think about crypto security breaches, they often assume the problem lies within smart contract vulnerabilities.

But some of the biggest exploits in history didn’t originate on-chain at all, they happened off-chain, bypassing traditional audit defenses.

A prime example is the Bybit $1.5 billion attack, which wasn’t caused by a flaw in the smart contract but rather by a frontend compromise.

The attacker injected malicious JavaScript into the exchange’s frontend, altering how bybit team sends funds from warm wallet to hot, or vice versa.

Why Off-Chain Attacks are So Dangerous

Unlike smart contract vulnerabilities, which can be audited and fixed before deployment, off-chain attacks target elements that are often overlooked, including:

• Website Frontends: A compromised frontend can trick users into approving malicious transactions.
• DNS Hijacking: Attackers reroute website traffic to phishing sites that look identical to the real ones.
• Malicious API Integrations: Third-party services like analytics tools or chat widgets can be exploited to inject malicious scripts.
• Compromised Private Keys: Poor operational security (e.g., leaked API keys or private keys) can allow attackers to take control of critical infrastructure.

There is Security Beyond Audits

While audits play a crucial role in securing smart contracts, they are not a silver bullet. Security must be approached holistically, considering frontend, infrastructure, key management, and user interactions.

1. Choose Reputable Auditors

• A thorough audit isn’t just about running tools, it requires manual review, threat modeling, and understanding external dependencies.
• A strong auditing firm will also assess operational security, not just contract logic.
• Look for auditors with a proven track record of identifying both on-chain and off-chain vulnerabilities.

2. Implement Continuous Monitoring and On-Chain Surveillance

• Even if a contract is secure at launch, new attack vectors can emerge over time.
• On-chain monitoring tools like Forta, OpenZeppelin Defender, and Chainalysis can detect suspicious behavior in real-time.
• Alerts can help prevent an exploit from escalating.

3. Launch a Bug Bounty Program

• Ethical hackers can often find issues that audits and internal teams miss.
• Platforms like Immunefi, HackenProof, Remedy and Code4rena have helped projects detect critical vulnerabilities before they are exploited.
• Offering competitive bug bounty rewards incentivizes white-hat hackers to help protect the protocol.

4. Strengthen Frontend Security

Most off-chain attacks start at the user interaction level, particularly through phishing, frontend compromises, or social engineering.

Best practices for frontend security:

• Use Content Security Policies (CSPs) to prevent unauthorized scripts from running on your frontend.
• Implement Multi-Factor Authentication (MFA) to protect critical admin accounts.
• Regularly monitor DNS and TLS certificates to ensure your domain isn’t hijacked.
• Minimize third-party dependencies by auditing APIs, widgets, and SDKs for vulnerabilities.
• Educate users, as phishing remains the biggest attack vector.

5. Secure Private Keys and Access Controls

• Many of the biggest hacks in crypto history happened not because of contract vulnerabilities, but due to compromised keys.
• Use Multi-Signature Wallets (e.g., Gnosis Safe) or Threshold Signatures to distribute control.
• Rotate keys frequently and enforce strict access policies.

6. Stay Updated on Emerging Threats

• Attack vectors evolve quickly. What was safe yesterday might not be safe tomorrow.
• Following security research, bug disclosures, and incident reports can help teams adapt their security strategies.

This is Why We Introduced Multi-Layered Audit Framework

At QuillAudits, we’ve seen it all, the flash loan exploits, the reentrancy attacks, the off-chain compromises.

That’s why we’ve introduced a Multi-Layered Audit Framework designed to break contracts before attackers can.

How It Works:

1. Senior Auditors First – Every project is reviewed by at least two senior auditors, depending on complexity. We go beyond scanning for common bugs, we conduct manual deep dives, threat modeling, static analysis, and functional testing.
    
2. Fresh Eyes on the Code – Interns join the process, not to lead, but to learn. Security requires new perspectives, and fresh eyes often spot what veterans might miss.
    
3. The Vigilant Squad – Our Red Team of world-class security researchers takes over, simulating real-world attacks to break what’s meant to be unbreakable. They think like hackers, push limits, and uncover gaps others might miss.
    
4. Verification & Retesting – Every fix is rechecked. Every assumption is challenged. Because a single missed vulnerability is all it takes to bring down a project.
    
5. Beyond the Audit – Security doesn’t end after the report is delivered. We offer real-time monitoring, incident response, and even insurance options to keep protocols protected long after deployment.
    

Audits are Necessary, But Not Sufficient

A smart contract audit is a crucial step in securing a blockchain project, but it’s not a magic bullet.

The reality is that security is an ongoing process, not a one-time event.

Projects that take a proactive approach—combining audits with continuous monitoring, red teaming, and real-time incident response—stand the best chance of staying ahead of attackers.

At QuillAudits, we don’t just check for vulnerabilities, we hunt them down before attackers do. Because in Web3, security isn’t a luxury. It’s survival.