The Ethereum community has proposed a new standard, ERC 7265, that could improve the security of DeFi protocols. This standard is designed to address the growing challenges of protecting DeFi users from hacks and other security risks that have resulted in significant losses in the past. ERC 7265 could be a key step in enhancing the resilience and trustworthiness of the DeFi ecosystem.
The DeFi sector has witnessed a surge of security breaches lately, with malicious actors targeting protocols such as Poly Network, Chibi Finance, Sturdy Finance, Jimbos Protocol on Arbitrum, and Hundred Finance, among others.
These attacks pose serious risks to the DeFi landscape, as they increase in frequency and severity. This proposal aims to address some of the challenges that these exploits entail. The need for effective protective measures in the DeFi sector is underscored by several high-profile hacking incidents.
The DeFi sector faces a serious threat from protocol breaches, which can wipe out the total value locked (TVL) in a matter of seconds. These incidents expose a critical weakness in the security and resilience of the decentralized finance ecosystem. To address this issue, the Ethereum community is working on a proposed standard known as ERC 7265.
The proposed ERC 7265 standard by the Ethereum community introduces a “circuit breaker” feature for DeFi protocols. This feature would enable smart contracts to halt token transfers before they leave the contracts during a security breach.
“The circuit breaker allows teams to protect their protocol with customized rate limit parameters for each asset,” says Meir Bank of Fluid Protocol. He adds that this feature would prevent “the attacker from draining the entire contract in a matter of seconds. Most of the funds can be saved.”
The ERC 7265 standard is mainly designed for DeFi protocols that have governance-based upgrades, which is a common feature in DeFi. Bank claims that this integration has minimal drawbacks and significant advantages for such governed DeFi protocols.