What is a Audit?
Quick Definition
An audit is an independent examination of a protocol's code, reserves, or operations by qualified third parties to verify accuracy and compliance with stated claims.
Full Definition
Audits are a foundational tool for accountability in finance. An independent auditor examines a company's books, operations, or systems, and provides an opinion on whether they accurately reflect reality. The value of an audit comes from the independence and expertise of the auditor, giving stakeholders a way to evaluate claims without conducting the review themselves.
In the digital asset space, audits typically take two forms. Smart contract audits are technical reviews of the code that runs on-chain, identifying bugs, vulnerabilities, and design flaws before they can be exploited. Reserve audits (or attestations) verify that the assets backing a token actually exist and match what the issuer has claimed. Both types of audit are important, and serious projects invest in both.
What makes an audit credible
Not all audits are equal. The credibility of an audit depends on several factors: the reputation and independence of the auditor, the scope of the review (limited reviews can miss important issues), the depth of the examination, and the transparency of the resulting report. A vague summary from an unknown firm is meaningfully different from a detailed report from a well-respected, independent firm.
When evaluating an audit, holders should consider who conducted the review, what was examined, what findings were reported, and how any identified issues were addressed.
Audits and Steady
Steady's smart contracts are subject to security audits before deployment, and audit reviews may be conducted periodically as the protocol evolves. On the reserve side, the backing is supported by bank attestations and other supporting documentation that can be reviewed through the Transparency Portal. As Steady grows, its audit and attestation framework may continue to evolve to meet operational, regulatory, and institutional requirements. Current audit and attestation information is available through the Transparency Portal.
Related Terms
Proof of Reserves
ReadProof of reserves is a verification mechanism that demonstrates a protocol or issuer holds the assets it claims to hold, typically combining on-chain data with off-chain attestations.
Reserve Verification
ReadReserve verification is the process by which holders, auditors, or other third parties confirm that a stablecoin issuer's claimed reserves actually exist and match the circulating supply.
Risk Monitoring
ReadRisk monitoring is the continuous process of identifying, measuring, and responding to risks that could affect a protocol, its assets, or its users.
Transparency Portal
ReadA transparency portal is a publicly accessible dashboard where a protocol publishes detailed information about its operations, reserves, and performance.
Other Glossary Items
Learn about common and essential terms related to Steady and other stablecoin protocols.
Algorithmic Stablecoin
ReadAn algorithmic stablecoin attempts to maintain its value through automated rules that adjust token supply based on market demand, rather than holding equivalent reserve assets.
AML
ReadAML (Anti-Money Laundering) refers to the laws, regulations, and procedures designed to prevent the use of financial systems for laundering the proceeds of crime.
APY
ReadAPY, or Annual Percentage Yield, is the standardized rate of return an asset generates over a year, including the effect of compounding.
Arbitrum
ReadArbitrum is a Layer 2 blockchain network built on top of Ethereum, designed to offer faster and cheaper transactions while inheriting Ethereum's security and infrastructure.
Asset Backing
ReadAsset backing refers to the real-world or on-chain assets held by the issuer to support the value of every token in circulation.
Asset Locking
ReadAsset locking refers to restricting access to funds for a defined period or condition, during which they cannot be transferred or used.
Asset Segregation
ReadAsset segregation is the practice of keeping client or backing assets separate from the issuer's operational funds, protecting them from the issuer's other obligations.
Backing
ReadBacking refers to the assets or mechanisms that support a stablecoin's value and help it maintain its intended reference value.
Blockchain Network
ReadA blockchain network is the system of connected participants and infrastructure that validates, records, and maintains data on a specific blockchain.
Blockchain
ReadA blockchain is a distributed digital ledger that records transactions across a network of computers in a secure, transparent, and tamper-resistant way.
Bridge
ReadA bridge is a mechanism that enables the transfer of assets or data between different blockchain networks.
Clarity Act
ReadThe Clarity Act is a proposed US legislative framework intended to clarify the regulatory treatment of digital assets, defining when they should be treated as securities versus commodities.
Collateralization / Over-collateralization
ReadCollateralization refers to the ratio between the value of assets held in reserve and the value of tokens issued. Over-collateralization means holding more in reserves than the value of tokens issued.
Composability
ReadComposability refers to the ability of different protocols, contracts, and tokens on a blockchain to interact and combine with each other seamlessly.
Counterparty Exposure
ReadCounterparty exposure refers to the risk that another party, such as a bank, custodian, broker, or service provider fails to fulfill its obligations, potentially affecting the assets or funds it holds.
LearnMoreAboutSteady
Transparency Portal
reserves, statements, audits, smart contract, and more.
FAQs
Discover the basics about Steady in our frequently asked questions.
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