diff --git a/README.md b/README.md
index 1d18de5a8..e3b2bef4a 100644
--- a/README.md
+++ b/README.md
@@ -1,5 +1,7 @@
 # code-server · [!["GitHub Discussions"](https://img.shields.io/badge/%20GitHub-%20Discussions-gray.svg?longCache=true&logo=github&colorB=purple)](https://github.com/cdr/code-server/discussions) [!["Join us on Slack"](https://img.shields.io/badge/join-us%20on%20slack-gray.svg?longCache=true&logo=slack&colorB=brightgreen)](https://cdr.co/join-community) [![Twitter Follow](https://img.shields.io/twitter/follow/CoderHQ?label=%40CoderHQ&style=social)](https://twitter.com/coderhq)
 
+![Lines](https://img.shields.io/badge/Coverage-46.71%25-green.svg)
+
 Run [VS Code](https://github.com/Microsoft/vscode) on any machine anywhere and access it in the browser.
 
 ![Screenshot](./doc/assets/screenshot.png)
diff --git a/ci/README.md b/ci/README.md
index 5ef2a2c51..b261a0ff4 100644
--- a/ci/README.md
+++ b/ci/README.md
@@ -21,6 +21,7 @@ Make sure you have `$GITHUB_TOKEN` set and [hub](https://github.com/github/hub)
       - Remember to update the chart version as well on top of appVersion in `Chart.yaml`.
       - Run `rg -g '!yarn.lock' -g '!*.svg' '3\.7\.5'` to ensure all values have been
         changed. Replace the numbers as needed.
+   4. Update the code coverage badge (see [here](#updating-code-coverage-in-readme) for instructions)
 2. GitHub actions will generate the `npm-package`, `release-packages` and `release-images` artifacts.
    1. You do not have to wait for these.
 3. Run `yarn release:github-draft` to create a GitHub draft release from the template with
@@ -43,6 +44,19 @@ Make sure you have `$GITHUB_TOKEN` set and [hub](https://github.com/github/hub)
 11. Update the homebrew package.
     - Send a pull request to [homebrew-core](https://github.com/Homebrew/homebrew-core) with the URL in the [formula](https://github.com/Homebrew/homebrew-core/blob/master/Formula/code-server.rb) updated.
 
+## Updating Code Coverage in README
+
+Currently, we run a command to manually generate the code coverage shield. Follow these steps:
+
+1. Run `yarn badges`
+2. Go into the README and change the color from `red` to `green` in this line:
+
+```
+![Lines](https://img.shields.io/badge/Coverage-46.71%25-red.svg)
+```
+
+NOTE: we have to manually change the color because the default is red if coverage is less than 80. See code [here](https://github.com/olavoparno/istanbul-badges-readme/blob/develop/src/editor.ts#L24-L33).
+
 ## dev
 
 This directory contains scripts used for the development of code-server.
diff --git a/package.json b/package.json
index a432acab4..33310d2c0 100644
--- a/package.json
+++ b/package.json
@@ -26,7 +26,8 @@
     "test": "./ci/dev/test.sh",
     "ci": "./ci/dev/ci.sh",
     "watch": "VSCODE_IPC_HOOK_CLI= NODE_OPTIONS=--max_old_space_size=32384 ts-node ./ci/dev/watch.ts",
-    "icons": "./ci/dev/gen_icons.sh"
+    "icons": "./ci/dev/gen_icons.sh",
+    "badges": "istanbul-badges-readme"
   },
   "main": "out/node/entry.js",
   "devDependencies": {
@@ -53,6 +54,7 @@
     "eslint-config-prettier": "^6.0.0",
     "eslint-plugin-import": "^2.18.2",
     "eslint-plugin-prettier": "^3.1.0",
+    "istanbul-badges-readme": "^1.2.0",
     "leaked-handles": "^5.2.0",
     "parcel-bundler": "^1.12.4",
     "prettier": "^2.0.5",
@@ -124,10 +126,16 @@
     "coverageDirectory": "<rootDir>/coverage",
     "coverageReporters": [
       "json",
+      "json-summary",
       "text"
     ],
     "coveragePathIgnorePatterns": [
       "out"
-    ]
+    ],
+    "coverageThreshold": {
+      "global": {
+        "lines": 40
+      }
+    }
   }
 }
diff --git a/test/socket.test.ts b/test/socket.test.ts
index 7a5a71764..9ff5038ec 100644
--- a/test/socket.test.ts
+++ b/test/socket.test.ts
@@ -14,8 +14,8 @@ describe("SocketProxyProvider", () => {
   const onServerError = new Emitter<{ event: string; error: Error }>()
   const onClientError = new Emitter<{ event: string; error: Error }>()
   const onProxyError = new Emitter<{ event: string; error: Error }>()
-  const fromServerToClient = new Emitter<string>()
-  const fromClientToServer = new Emitter<string>()
+  const fromServerToClient = new Emitter<Buffer>()
+  const fromClientToServer = new Emitter<Buffer>()
   const fromClientToProxy = new Emitter<Buffer>()
 
   let errors = 0
@@ -92,10 +92,10 @@ describe("SocketProxyProvider", () => {
 
   it("should work without a proxy", async () => {
     server.write("server->client")
-    const dataFromServerToClient = await (await getData(fromServerToClient)).toString()
+    const dataFromServerToClient = (await getData(fromServerToClient)).toString()
     expect(dataFromServerToClient).toBe("server->client")
     client.write("client->server")
-    const dataFromClientToServer = await (await getData(fromClientToServer)).toString()
+    const dataFromClientToServer = (await getData(fromClientToServer)).toString()
     expect(dataFromClientToServer).toBe("client->server")
     expect(errors).toEqual(0)
   })
diff --git a/yarn.lock b/yarn.lock
index 618121a70..d692116ec 100644
--- a/yarn.lock
+++ b/yarn.lock
@@ -4360,6 +4360,11 @@ isstream@~0.1.2:
   resolved "https://registry.yarnpkg.com/isstream/-/isstream-0.1.2.tgz#47e63f7af55afa6f92e1500e690eb8b8529c099a"
   integrity sha1-R+Y/evVa+m+S4VAOaQ64uFKcCZo=
 
+istanbul-badges-readme@^1.2.0:
+  version "1.2.0"
+  resolved "https://registry.yarnpkg.com/istanbul-badges-readme/-/istanbul-badges-readme-1.2.0.tgz#f6dc226fb2ef498b1743ca15ae2dd82ccd3b0c28"
+  integrity sha512-7yU9tFbl7IsqlgfFF52G1fj7w2Z2k+UykVrCCIAQ8pnezZIIwxtAD079cIcqsbyCH7gCAALhiW3waHv9C24vrg==
+
 js-tokens@^4.0.0:
   version "4.0.0"
   resolved "https://registry.yarnpkg.com/js-tokens/-/js-tokens-4.0.0.tgz#19203fb59991df98e3a287050d4647cdeaf32499"