• Ethereum community members have proposed ERC 7265, a new standard to reduce losses from DeFi hacks.
• The “Circuit Breaker” is designed to slow down or halt outflows from DeFi protocols when they exceed a set threshold.
• ERC 7265 is not without flaws and does nothing to prevent hacks.
Overview of ERC 7265
Ethereum community members have proposed ERC 7265, a new standard dubbed the “Circuit Breaker” which is designed to slow down or halt outflows from Decentralized Finance (DeFi) protocols when they exceed a set threshold. This solution has its pitfalls and does nothing to prevent hacks.
DeFi Hacks on the Rise
The first half of 2023 alone has seen about 85 exploits in the DeFi space accounting for $292 million in losses across the ecosystem, according to data from Beosin, a blockchain security firm. In response, some members of the Ethereum community have proposed ERC 7265 as a solution for backstopping these losses.
How Does ERC 7265 Work?
Built by Hydrogen Labs smart contract developer Diyahir Campos, Dereg founder Phillipe Dumonet, and Fluid Protocol founder Meir Bank, ERC 7265 is designed to slow down or halt outflows from DeFi protocols when they exceed a set threshold. A study by these developers concluded that DeFi protocols do not typically record over 25-40% in daily outflows and this feature could give governance teams enough time to identify and respond to hacks by pausing outflows before treasuries are wiped out completely.
„Not a Silver Bullet“
Hydrogen Lab’s Diyahir admits that ERC 7265 is not without flaws and that it does nothing to prevent hacks in the first place. Exploiters can still take as much as the circuit breaker allows or carry out small attacks over time until their targets are drained completely.
Conclusion
ERC 7265 may prove useful in reducing losses from DeFi hacks but it is important for investors who use these platforms to remain vigilant at all times as there is no silver bullet that will protect them against malicious actors looking to exploit vulnerabilities within smart contracts.