Checks-effect-interaction pattern

Why does it matter?

When calling an external address, for example when transferring tokens to another account, the calling contract is also transferring the control flow to the external entity.

Assuming this external entity is a smart contract as well, the external entity is now in charge of the control flow and can execute any inherent code within it.

This can leave your contract open to re-entrancy attacks.

Negative Example

function withdrawToken(uint256 amount) public {
    require(userBalance[msg.sender] >= amount, "requested amount exceeds user balance");
    
    // external call
    bool success = wmdToken.transfer(msg.sender, amount);
    require(success, "Withdrawal failed!");

    // internal state update
    userBalance[msg.sender] -= amount;
}

wmdToken.transfer could be maliciously coded to call withdrawToken again, and the contract would transfer more tokens out without modifying the user balance.
The attacker would only have to be careful of stopping the loop before running out of gas, and it would drain your contract of iToken.

Solution

The high-level idea is as follows:

check & update the internal states (balances)
keep external interactions (function calls) to the last step

Positive Example

    function withdraw(uint amount) external {      
        balances[msg.sender] -= amount;
        
        bool success = wmdToken.transfer(msg.sender, amount);
        require(success, "Withdrawal failed!");
        emit Withdrawal(msg.sender, amount);
    }