Cryptoasset Anti-Financial Crime Specialist (CCAS) Certification Practice Test

What is a potential risk associated with smart contracts?

1. Instant transaction confirmations.

2. The inability to alter contracts once executed.

3. Vulnerability to coding errors.

4. Increased transaction fees.

The correct answer is: Vulnerability to coding errors.

A potential risk associated with smart contracts stems from their vulnerability to coding errors. Smart contracts are essentially self-executing contracts with the terms of the agreement directly written into code. This code is immutable once deployed, meaning that any errors or flaws in the coding can lead to unintended consequences, such as the loss of funds or the inability to carry out certain functions correctly. Given the complexity of the code and the potential lack of thorough testing, mistakes can be difficult to detect. A vulnerability could allow malicious actors to exploit the contract for fraud or theft, threatening the integrity of the system in which the contract operates. This risk highlights the importance of meticulous programming, auditing, and testing of smart contracts before they are made operational in a blockchain environment. In contrast, the other choices do not represent inherent risks that threaten the overall reliability and security of smart contracts in the same way. For example, while the inability to alter contracts once executed can be seen as a limitation, it is also a feature that ensures certainty and trust. Instant transaction confirmations are generally seen as an advantage of smart contracts, and while increased transaction fees can occur in certain scenarios, they are not unique to smart contracts and do not directly stem from their design.