A group of Ethereum members has proposed a new standard aimed at improving the security of DeFi protocols. Named ERC-7265 (Ethereum Request for Comments), this standard will enable a “Circuit Breaker”, which allows DeFi protocols to add a back-stop to their smart contracts.
Circuit Breaker will come into play in case of a project being hacked. It prevents moves that have a significant impact on smart contracts by halting transactions if tokens on the platform suffer a record drop. The standard’s builders are @tcb_00, @Diyahir and @real_philogy.
ERC-7265 was initiated in the wake of increasing DeFi hacks. Nearly $3 billion has been stolen from DeFi hacks to date, according to data from The Block.
Meir Bank, a representative of Fluid Protocol, said: “We all agree, DeFi is broken. Not only are there many hacks, but the results are catastrophic. When protocols are hacked, often they lose everything. The TVL tanks to zero in a matter of seconds.”
Furthermore, DeFi attacks lead to great losses because most protocols do not react fast enough to stop them. By the time the hack was realized, it was too late, even trying to fix it was pointless. ERC-7265 will create a circuit breaker to protect protocols, with highly customized rate-limiting parameters for each asset. Once a hack occurs, an attacker will no longer be able to drain all tokens in just a few seconds, so the project can fully recover their funds.
As described, ERC-7265 has very few downsides and offers many optimizations for DeFi protocols, which is especially useful in governing platforms. Anyway, ERC-7265 is a new standard, yet to be approved by the Ethereum development team.