Decentralized finance (DeFi) has been a rapidly growing sector of the cryptocurrency industry, but it has also been a target for hackers. In 2022, at least $3.1 billion was stolen from DeFi protocols, 65% of which were cross-chain bridges. This has raised concerns about the security of DeFi protocols and the need for better measures to protect users’ funds.
To address this issue, a new Ethereum Request for Comment (ERC) proposal has been published on GitHub, proposing a benchmark for a DeFi circuit breaker. The ERC-7265 proposal aims to set a standard for a smart contract that can stop suspicious outflows of large tokens from a DeFi protocol, essentially preventing hacks and minimizing losses.
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The proposal’s lead developer, Campos, believes circuit breakers could have prevented billions in losses last year. Campos itself fell victim to the Euler Finance hack in March, which spread to 11 other protocols. He noted that the TVL (Total Locked Value) charts and transactions that occurred during the Euler Finance hack raised the question of why DeFi protocols allow 100% of their TVL to be withdrawn in 10 seconds or five blocks.
However, the circuit breaker has not been without controversy, and some have worried that it could be used for potentially nefarious purposes. DeFi researcher Chris Black was among those who expressed concern that circuit breakers could allow DeFi developers to freeze users’ funds forever. Campos clarified that the circuit breaker is not suitable for every DeFi protocol and does not guarantee that the protocol is secure.
Circuit breakers are still taking shape, but Campos is confident it will be ready in a few months, which puts it in a really good stage for integration into protocols.
Cointelegraph
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