A group of programmers from the Ethereum community proposed a new standard ERC-7265: Circuit Breaker to strengthen the security of DeFi protocols.
The solution enables developers to insert into smart contracts an automatic “circuit breaker” that halts the movement of tokens when the threshold outflow rate is reached.
This will help preserve most of the funds in the event of a hack, noted Fluid Protocol founder Meir Bank. The remaining coins stolen by attackers will be easier to recover, he added.
Developers using the aliases Diyahir, philogy and bd contributed to the creation of ERC-7265.
“We all agree that DeFi is not right. There are not only many hacks, but the consequences are catastrophic — protocols often lose everything as a result of attacks. TVL can drop to zero in seconds,” Bank said.
According to The Block, at the beginning of June the cumulative amount of funds stolen from DeFi protocols reached $2.85 billion. In the last 12 months alone the figure rose by nearly $800 million.
According to Bank, attacks in the sector cause substantial losses because teams cannot react quickly enough. In most DeFi projects any changes are made through a governance system, which also slows the response. This shortcoming would be addressed by an automatic “circuit breaker” for withdrawals with adjustable parameters.
“In case of a hack the attacker will no longer be able to empty a smart contract in a matter of seconds,” Bank stressed.
In the group’s view, the mechanism provided for in ERC-7265 should operate with a minimal rate of errors. The analysis showed that daily liquidity drawdown in smart contracts simply does not reach 25-40% unless we are talking about a hack.
ERC-7265 is a proposal open for community discussion and comment. After that it could be considered by the Ethereum core developers team for potential inclusion in some future network upgrade.
As a reminder, in the first half of 2023 the crypto industry lost around $655.6 million in hacks and fraud.