Definition ∞ A systematic examination and verification of transactions, smart contract code, and operational data directly recorded and visible on a blockchain ledger. Unlike traditional audits, an on-chain audit leverages the transparency and immutability of distributed ledgers to provide verifiable assurances of financial activity or protocol behavior. This process helps confirm compliance, detect anomalies, and validate the integrity of decentralized applications. It offers a high degree of transparency for all network participants.
Context ∞ The growing demand for transparency and accountability in decentralized finance has made on-chain audits a critical topic in crypto news, particularly for protocols seeking to build investor trust. These audits provide a public record of financial flows and smart contract interactions, allowing for independent verification of claims. Regulatory bodies are increasingly exploring how on-chain audit capabilities can be leveraged for compliance monitoring and market surveillance within the digital asset sector.
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