The Ethereum community members have come together to propose a new standard, in order to boost the security of DeFi projects. The protocol termed ERC 7265, will enable a “circuit breaker.” It will help DeFi protocols add a back-stop in smart contracts. In effect, whenever hacks take place, this will prevent tokens from leaving the contract. While announcing the standard, Fluid Protocol developer Meir Bank mentioned on Twitter,
“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 0 in a matter of seconds.”
A recent research report by De.Fi brought to light that around $204 million worth of funds has been stolen from the ecosystem in Q2 2023. According to the data, the frequency of such activity parallelly rose during the quarter. Bringing to light the fate of Ethereum, the report underlined,
“In terms of the blockchain platform, Ethereum (ETH) continues to be a hotspot for fraudulent activities, reporting losses of $82.5 million.”
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The need for ERC 7625
Bank further pointed out that the bridges, oracles, smart contracts, or other dependencies weren’t essentially the reason for hacks. According to Bank, most protocols are “fully upgradeable” by governance. This meant that governance will theoretically be able to “mitigate” an attempted hack by fixing the protocol. Chalking out the theory-practical gap, he explained,
“In practice, however, most protocols simply lack enough response time to react to a hack. By the time anyone even notices, it is too late, and by the time a team is able to put through a recovery plan through governance, it is far too late. This doesn’t make any sense.“
Well, this is where ERC 7265 could come into the picture and help recover funds. However, it should be noted that this is just a proposed standard for now. There is still no clarity if the Ethereum developer team will end up implementing it.
Also Read: Crypto Hacks Drop 70% in Q1 2023: Research
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