A merchant purchased one ton of rice from a field located in another country. He selected the type of rice and agreed on the price, quantity, and delivery date. Once the owner of the field received the payment, he replaced the rice with barley, increased the price, decreased the quantity, and delayed the delivery date. The merchant was surprised by this and filed a lawsuit against the field owner, but he found out that there was a provision in the contract that allowed the field owner to modify all the terms of the contract as he pleased.
In the world of cryptocurrency, ownership of the smart contract is crucial. If not renounced, it can lead to issues. For instance, suppose a trader decides to invest in a particular cryptocurrency. In that case, the trader would audit the smart contract and agree to the terms and rules set by the contract. These terms may include the inability to pause trading, prevent the creation of new currencies, put wallets on the blacklist, or change the percentage of fees in buying and selling operations, among others. Suppose the trader invests $10,000 representing 1% of the total supply based on these terms and rules. After a month, the trader may be surprised to find that trading has been stopped for a month, only to resume with an increase in the total supply from one billion to two billion currencies. This, in turn, leads to a decrease in the price of the currency. The anti-whale ratio may also change from 1% to 0.1% of the total supply, making it difficult for the trader to sell. Understandably, the trader may become upset and confront the crypto team. They may even warn others not to buy this particular cryptocurrency. In response, the crypto team may put the trader’s wallet on the blacklist and withdraw funds from all other buyers a week later.
This example is an exaggeration, but it clearly shows the privilege available to the team if ownership of the smart contract is not renounced.
What is meant by renouncing ownership of a smart contract?
Renouncing ownership of the contract means that the entity that created the contract loses control over it forever.
Renouncing smart contract benefits
Trust and Transparency: Renouncing a contract is an honest act that demonstrates trustworthiness. It confirms the project team’s commitment to a fair and decentralized system and ensures that the contract cannot be manipulated for personal gain.Ensuring the safety and security of the smart contract: The smart contract usually goes through a period of experimentation and testing before putting the cryptocurrency into circulation to ensure the safety of all technologies and the absence of any problems. A smart contract auditing company can be resorted to verify all of this, and after these procedures, the safety and security of the contract are proven. The best course of action for investors is to refrain from making any alterations to the contract since any modifications can lead to gaps or technical errors if not thoroughly scrutinized.Community trust: Investors in the world of cryptocurrencies and decentralized exchange often look at renounced contracts as evidence of a strong, trustworthy, and community-led project. Knowing that developers cannot interfere with smart contract functions will strengthen trust in the project.Prevent Rug Pulls: Rug pulls are scams in which project owners withdraw investor funds by manipulating the contract. Renouncing the contract (if liquidity is locked) ensures that such malicious actions are prevented, as project owners are no longer able to make unauthorized changes.
How can I verify the smart contract renunciation?
You must go to the currency contract page, then click on the “Contract” icon, then click on the “Read Contract” icon. You then must click on the “Owner” icon. Either you will get an address that looks like this (0x00000000000000000000000000000000000000dEaD) or you may get an address made up of different numbers and letters like this one (0x2a1a6d2DfB3DD4eE796A1058f08b7c242899Ba73). In the first scenario, the contract is renounced. In the second scenario, the owners can modify the contract.
If you come across the first address that indicates renunciations of the contract, it is important to ensure that there is no other contract hidden in the Contract Codes page which is located next to the “Read Contract” icon. You can verify this by checking if the phrase “Proxy” is absent from the page. If the word exists, then there is no point in renouncing the contract because the contract whose ownership is being renounced is controlled by another hidden contract. So, you will be dealing with a team of scammers who are putting in a lot of effort to trick you.
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