If a smart contract is not well-coded, it could be prone to hacks. However, not everyone is an expert in reading smart contracts. With hacking threats always looming, it could prove to be daunting to decide whether crypto projects are safe and reliable. One way to do this is by ensuring that the smart contracts of the projects you are involved in are regularly audited.
In this article, we will discuss what crypto audits are and how they can help you understand more about whether the investment you are making is relatively safe.
What is a Crypto Audit?
A crypto audit is an assessment of a project’s smart contracts to ensure that they are safe and secure. In essence, when a project approaches a crypto audit company to audit their contracts, the latter will review the code of the smart contracts of the project to make sure there are no vulnerabilities and security issues, as well as suggest ways to fix them.
This process can be done manually or with the help of specialized software. It is important to note that a crypto audit is different from a code review. A code review assesses the quality of the code, while a crypto audit assesses the security of the code.
Depending on the auditing company, these audits might prove to be complex. For example, third-party integrations with smart contracts can be a vulnerability as well. Such third-party integrations are quite common in the crypto world. As a result, this could mean that other third-party smart contract would also need to be reviewed.
If the auditor deems that there are issues with the smart contracts, it would highlight them in a report they provide. One way to check if a given project has been audited is to go to Coinmarketcap and select the project you are trying to evaluate. You should find a clickable element leading you to their audit (that is, if they did one).
Why are Crypto Audits Important?
Crypto audits are essential because they help to ensure that the smart contracts of a project are not susceptible to hacks. We have seen time and time again how devastating a hack can be for a project. In some cases, hacks have even led to the death of a project. If projects regularly audit their smart contracts, it can help to ensure that it is not vulnerable to attack. One has to remember that a single bug in a code can result in a multi-million dollar hack. In some cases, small mistakes caused hacks of $325 million.
In addition, crypto audits can also help to uncover potential design flaws in a project’s smart contracts. These flaws can be exploited by hackers to cause significant damage to a project. By catching these design flaws early on, crypto audits can help save projects from potential disaster. It is why one of the worries of crypto projects was to take audits more seriously, as if they do not, they could prove to be immensely costly.
An audit confirmation is not enough – dive deeper
One of the issues that is not generally mentioned is that it is not enough to trust companies who simply say that they have undergone a smart contract audit. It would be best if you looked at what the audit said about their project. Some crypto projects simply boast that an audit has been done but do not go into the details of what the conclusion of the audit was. It is important to make sure that you access the audit of the project you would like to invest in and see if there are any major red flags the project needs to address.
Crypto audits are an essential part of ensuring the safety and security of cryptocurrency projects. However, it does not ensure that they will never be hacked. It simply means that the project is trying the bare minimum to ensure that it is less likely to happen. Nevertheless, if issues are found and the project does not act on them, the announcement that an audit has been made could simply be a marketing stunt.