Crypto Terms: Letter S

What is Smart Contract Audit?

Smart Contract Audit MEANING:
Smart Contract Audit - an in-depth investigation and analysis of the code of a smart contract to find issues, errors, and security flaws.
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Let's find out Smart Contract Audit meaning, definition in crypto, what is Smart Contract Audit, and all other detailed facts.

A smart contract audit is a comprehensive analysis of a smart contract's code to identify bugs, errors, or security flaws, as well as possible fixes.

Since most smart contracts handle large sums of money, the audits are essential, because a single error or vulnerability can result in significant losses. More specifically, the users and stakeholders of the decentralized application in question can be at risk of losing all of their assets.

Smart contract audits are pretty complex because smart contracts frequently interact with one another. For this reason, the system checks are frequently expanded to include additional smart contracts involved in other transactions, even the ones in which a certain smart contract is not directly involved.

The recommendations of the auditors are announced to the project team ahead of time, and their responses are included in the final report. Teams are eager to obtain an audit in order to gain user confidence and improve the project's credibility because it is regarded as a symbol of authenticity and integrity

Typically, audits are carried out in phases:

  • The auditors and the team agree on the specifications (purpose, architecture, design, etc.) and the scope of the audit.
  • The auditors perform unit tests (testing individual functions) and integration tests (testing larger parts).
  • The auditors check for contract vulnerabilities using analysis tools and automated bug detection.
  • The auditors examine the code manually to determine the developer's intentions and interpret the findings in that context.
  • The team's findings and solutions are documented in the report.

Why are smart contract audits so important? For instance, the Ethereum chain split in 2016 was caused by a code vulnerability exploited by an attacker. The attacker was able to drain millions of dollars worth of ETH because of a simple bug. This eventually resulted in disagreements in the community and a hard fork because they couldn’t decide whether to forcibly return the assets or not.

In the booming DeFi business, where bug-filled smart contracts are frequently rushed out to suit investor demand, smart contract audits are becoming extremely vital. Harvest, bZx, Yam Finance, Eminence, and Balancer are just a few of the million-dollar hacks that have occurred in 2020 because of various bugs in smart contracts.