How Does the Concept of ‘Code Is Law’ Apply to a Bug in a Derivatives Smart Contract?
'Code is law' means the smart contract's code dictates the terms and execution, overriding any external legal or human interpretation. If a bug exists, the contract will execute the flawed code, potentially leading to unintended loss of funds, and the blockchain will record the transaction as valid.
The immutability of the chain means the flawed transaction cannot be easily reversed, highlighting the need for rigorous auditing before deployment.
Glossar
Code
Algorithm ⎊ Code, within cryptocurrency, options trading, and financial derivatives, represents a defined set of instructions enabling automated execution of trading strategies or complex calculations related to pricing and risk assessment.
Bug
Exploit ⎊ A bug, within cryptocurrency, options, and derivatives, represents a vulnerability in code or protocol logic that can be leveraged to achieve an unintended outcome, often resulting in financial gain for the exploiter.