Overview of DeFi ( decentralized finance ) for audit professionals in the finance ecosystem
Every industrial revolution was driven by different automation.
The "Steam Engine" began the "First
Industrial Revolution", Previous industrial revolutions were
driven by "Factory Machines and Fossil Fuels". Whereas,
the on-going automation revolution is based on "Data-Driven
Artificial Intelligence" (AI) and "Blockchain Technology".
Cryptocurrency’s which is powered by #blockChain technology promise is
to make money and payments universally accessible– to anyone, no matter where
they are in the world.
Imagine a global, open alternative to every financial service
you use today — savings, loans, trading, insurance and more — accessible to
anyone in the world with a smartphone and internet connection.
Decentralized Finance (DeFi) is creating a new paradigm that proposes
quite an attractive alternative to fiat-world lending, assets and derivatives
markets, with the advantages offered by decentralized p2p protocols.
Decentralized finance, or DeFi for short, is composed of financial applications
that operate through a decentralized blockchain. They effectively cut out the
middle man that many of the finance-focused apps and platforms we use today
employ. Anyone with an internet connection can now take out a loan or trade on
open markets on the Ethereum platform. Dapps are designed to be global from day one — Whether you’re in Texas or Tanzania, you have access to the
same DeFi services and networks. Of course, local regulations may apply but,
technically speaking, most DeFi apps are available to anyone with an internet
connection.
As an Audit professional, smart contract audit is an independent review
that assesses the security and correctness of the code. Smart contract security
is paramount for any decentralized application that holds or controls the flow
of users’ hard-earned funds. This provides the following advantages. First,
users obtain an independent opinion on how the smart contract behaves, which
can alert them about potential threats. Project managers receive valuable
feedback about their projects and can take the necessary steps to mitigate
security risks. Finally, developers receive important security advice and
concrete security bug reports. However, not all audits are the same. The value
provided by an audit depends on the technology used to conduct it and the
expertise of the audit team.
Many DeFi projects require users to lock up an asset (ETH, DAI…) in
order to participate in the protocol, add liquidity to a market, or mint a new
asset. These assets locked as collateral have created a measurement for the
track record of these applications, called total value locked (TVL).
Finally,
In the simplest sense, a smart contract audit is a third-party review of the source code of a smart contract. Although a completed audit means that the code was reviewed, the rigorousness of the audit may vary substantially - and this rigor is really what matters for security, not merely the presence of an audit. For instance, a dApp may flaunt that no errors were found during the audit process, but it’s difficult to determine whether this means that the code quality was extremely high or whether the auditor was really bad.
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