The ERC-7265 standard will allow Ethereum DeFi protocols to enable a “kill switch” to improve their security and mitigate the impact of hacks.
Called “Circuit Breaker”, the new standard proposed by the Ethereum community aims to improve the security of the protocols that make up the DeFi ecosystem within the Ethereum network.
As explained by its creators, this standard will allow decentralized finance protocols to add a “kill switch” to ensure their security and protect their stability. This circuit breaker will help DeFi protocols set rate limits per asset, in order to slow down asset withdrawals. This way, if a DeFi protocol is breached, the attacker will not have the ability to drain existing funds within a smart contract in seconds, as has unfortunately happened in previous cases.
Thus, the main objective of the ERC-7265 standard is to help protocols and applications in the DeFi ecosystem strengthen their security systems to limit the impact of hacks.
The ERC-7265 standard is being proposed as a potential solution to DeFi hacks, which have become increasingly frequent and drained more than $200 million from DeFi protocols in the second quarter of this year alone, according to data from De.Fi.
A solution to DeFi security problems
Meir Bank, one of the creators of the ERC-7265 standard, explained on Twitter that the “kill switch” proposed by the new standard will allow protocols to set a rate limit on withdrawals between 25% and 40% of the total funds deposited in a contract, since according to him, this is on average the percentage of assets that are affected in protocols when they are breached by a hacker.
While the standard could pose disadvantages for protocols, such as affecting their services due to “false positives,” Bank commented that ERC-7265 has many more advantages and is the solution to the biggest security problem facing DeFi protocols, which is the lack of response time to react and mitigate hacks.
On the other hand, Phillipe Dumonet, also a developer of the new Ethereum standard, told Blockworks that ERC-7265 does not pose any risk to the decentralization of protocols.
For the authors of the ERC-7265 standard, security is paramount to attracting more investors to the DeFi ecosystem. Both hope that their proposal will be adopted by dApp developers and that the Ethereum community can generate more feedback on it to improve the standard.
Continue reading: Polygon Network and De.Fi join forces to strengthen security on Web3
