PrivacySwap’s Ask the Orb: What is a smart contract audit?

Every cryptocurrency project has completed a smart contract security audit, including PrivacySwap. A smart contract security audit examines the smart contracts in a project in depth. These are necessary in order to protect monies invested through them.

If monies are taken, they cannot be recovered because all transactions on the blockchain are final. Auditors will typically evaluate the code of smart contracts, write a report, and provide it over to the project to work with. After that, a final report is issued, documenting any remaining mistakes as well as the work that has already been done to resolve performance or security concerns.

Security audits of smart contracts are prevalent in the Decentralized Finance (DeFi) ecosystem. If you’ve decided to invest in a blockchain project, the results of a smart contract code review may have influenced your decision.
While most individuals are aware of the necessity of audits in terms of cybersecurity, few are willing to go into the code. Let’s take a look at the common methodologies, tools, and outcomes of smart contract security audits so you can make better decisions.

Also Read: Bitcoin technical analysis for beginners

What is a smart contract audit?

The smart contract code of a project is examined and comments on during a smart contract security audit. These contracts are often written in the Solidity programming language and distributed via GitHub.

Security audits are especially important for DeFi projects that anticipate handling millions of dollars in blockchain transactions or a large number of players. Typically, audits follow a four-step procedure:
1. The audit team receives smart contracts for preliminary review.
2. The audit team submits its findings to the project team, who must act on them.
3. Based on the issues discovered, the project team makes modifications.
4. The audit team issues its final report, taking any new changes or faults into account.

When it comes to investing in new DeFi initiatives, smart contract audits are crucial for many crypto consumers. For projects that want to be considered seriously, it’s become the gold standard. Certain audit providers are also regarded as industry leaders, enhancing the value of their audits in the eyes of investors.

Why do we need smart contract audits?

Smart contracts become tempting targets for harmful attacks from hackers since large quantities of money are transferred through or locked in them. Minor coding flaws can result in the theft of large quantities of money. The DAO breach on the Ethereum blockchain, for example, seized around $60 million in ETH and resulted in a hard fork of the Ethereum network.

Because blockchain transactions are irreversible, it is critical to ensure that a project’s code is safe. Because the extremely secure nature of blockchain technology makes it impossible to reclaim cash and handle difficulties after the fact, it’s best to avoid vulnerabilities at all costs.

How do smart contract audits work?

A smart contract audit follows a very standard procedure among audit companies. While each auditor’s approach may change significantly, the following is a typical procedure:

1. Determine the audit’s scope. The project (its intended purpose) and the overall architecture establish the smart contract and project specifications. When writing and using code, a specification aids the audit team in understanding the project’s goals.
2. Provide a preliminary estimate based on the scope of work required.
3. Carry out testing. Their exact nature will change depending on the auditing team, their analysis tools, and their methodologies. In most cases, both manual and automated tests are performed.
4. Write a preliminary draft of the report that includes all of the errors you noticed and send it to the project team for feedback and corrections.
5. Release the final report, taking into account any actions made by the team to resolve the issues raised.

Also Read: How to: Calculate your crypto taxes

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