Formal Verification is the process of proving or disproving the correctness of a system's intended algorithms in accordance with a specific formal specification or property using formal mathematical methods. Formal verification examines the entire code and assists in ensuring that software functions as intended within a logical framework. In other words, it helps to demonstrate the accuracy of systems defined as cryptographic protocols, combinational circuits, digital circuits with internal memory, and source code systems.

Verification of a system is accomplished by creating formal proof over an abstract mathematical model of the system. Finite state machines, labeled transition systems, Petri nets, and the formal semantics of programming languages are used to model systems.

Formal Verification in Cryptocurrencies

The purpose of formal verification in cryptocurrencies is to examine the accuracy of the implementation of an electronic circuit or a program's execution with mathematical proof. Formal verification uses mathematically proven properties to ensure the integrity of cryptographic algorithms and blockchain mechanisms.

How Is Formal Verification Done?

Formal verification checks whether a design meets some requirements. The formal verification of a design, which will be specified hierarchically, is consistent with the designer's working method. For formal verification, a simple verifiable format should first be created.

Formal Verification in Smart Contracts

Smart contracts provide a new use case and enable the creation of decentralized, trust-based, and robust applications. When smart contracts handle a large amount of value, they are essential for security developers. Formal verification is one of the techniques used to improve smart contract security. It uses formal methods for specifying, designing, and verifying programs and is used to verify software systems and critical hardware.

When applied to smart contracts, formal verification proves that a contract satisfies a predefined property of its business logic. Formal verification provides strong guarantees about the functional correctness of smart contracts.

Why Is Formal Verification Used for Smart Contracts?

There are several reasons for using formal verification for smart contracts:

• Need for reliability
• Need for functional correctness proof
• Verification goals

Need for Reliability

Formal verification is used to evaluate the accuracy of systems that are critical to security. Smart contracts are high-value applications with access to large sums of money. Before distribution, formal verification ensures that the contract will operate normally on the blockchain network. Reliability is a desirable quality in any smart contract, and ensuring the reliability of a smart contract usually requires formal verification.

Need for Functional Correctness Proof

The most common way to prove that a smart contract meets certain requirements is through program testing. This method involves executing the contract with a sample of the expected data and analyzing the behavior. If the contract produces the expected result for the sampled data, it provides objective evidence of correctness for developers.

Formal verification can formally prove that the smart contract meets the requirements for an infinite number of applications without running the contract. Formal verification involves creating a formal contract that expresses the correct behavior of the contract and creating a mathematical model of the contract system.

Verification Goals

Verification goals refer to the system that will be formally verified. Formal verification uses small and simple software components that make up a larger system.

What Are the Cons of Formal Verification?

There are some cons of formal verification:

• Labor cost
• False negatives

Labor Cost

Creating formal verification is a difficult task that requires a high level of expertise. Formal verification is more expensive than contract evaluation methods for accuracy due to the required skill and effort.

False Negatives

Formal verification checks whether the execution of a smart contract matches the formal specification. Therefore, it is important to ensure that speculations accurately describe the expected behavior of a smart contract.

Incorrect speculations cannot be detected by formal verification, and as a result, a developer may mistakenly assume that the contract is error-free.