The Ethereum community has taken a significant step to enhance the security of decentralized finance (DeFi) protocols by proposing a new standard called ERC 7265. The proposed standard introduces a “circuit breaker” mechanism that enables DeFi protocols to implement a back-stop in their smart contracts. This circuit breaker would halt tokens from leaving the contracts in the event of a hack, providing an opportunity to prevent catastrophic losses.
The proposal comes in response to the increasing number of DeFi hacks, which have resulted in approximately $3 billion in stolen funds from various protocols. The community behind ERC 7265 aims to address the issue by allowing teams to create customized rate limits per asset, providing better protection for their protocols. When a hack occurs, the circuit breaker will restrict the attacker from draining the entire contract rapidly, potentially allowing for the recovery of a significant portion of the funds.
Meir Bank from Fluid Protocol emphasized that the current problem with DeFi attacks is the lack of quick reactions from protocols to stop them in time. The ERC 7265 standard targets protocols that can be upgraded by governance, which are prevalent in the DeFi space.
While the proposal looks promising, its acceptance and implementation as the final standard will depend on the core Ethereum team’s decision. ERCs are proposed standards, defining how specific features should be implemented on the Ethereum network. They undergo a process of community review and approval before being integrated by core developers. If implemented, the ERC 7265 standard could significantly improve the security landscape of DeFi and help mitigate potential hacks and losses in the future.
