Smart Contract Audit
A comprehensive security review of a smart contract's source code performed by specialized firms to identify vulnerabilities, bugs, logical errors, and potential attack vectors before or after deployment. Audits examine code quality, access controls, economic assumptions, and edge cases. While audits significantly reduce risk, they are not a guarantee of safety — exploits have occurred even in audited contracts.
“Before launching, Aave's smart contracts were audited by multiple firms including Trail of Bits and OpenZeppelin. Checking whether a DeFi protocol has been audited by reputable firms is a key part of due diligence.”
Smart Contract
Self-executing programs stored on a blockchain that automatically enforce the terms of an agreement when predetermined conditions are met. Smart contracts enable trustless transactions without intermediaries because the code, once deployed, executes exactly as written and cannot be altered (unless specifically designed to be upgradeable). They form the foundation of DeFi, NFTs, DAOs, and virtually all dApps.
DYOR (Do Your Own Research)
The practice of thoroughly investigating a cryptocurrency project before investing, including analyzing its team, technology, tokenomics, competitive landscape, community, and potential risks. DYOR is both a personal responsibility mantra in crypto and a disclaimer often used by influencers to absolve themselves of liability for their recommendations.
DeFi (Decentralized Finance)
An ecosystem of financial services built on blockchain networks that operate without traditional intermediaries like banks, brokerages, or insurance companies. DeFi uses smart contracts to provide lending, borrowing, trading, insurance, derivatives, and yield generation in a permissionless, transparent, and composable manner. Anyone with a wallet can participate.
Protocol
A set of rules, standards, and smart contracts that define how a blockchain network or decentralized application operates. In DeFi, 'protocol' typically refers to the suite of smart contracts that provide a specific financial service. Protocols are usually governed by DAOs and can be forked (copied and modified) because their code is open-source.