- Part of the Ethereum community proposed the ERC-7265 standard to reduce DeFi exposure to exploits.
- The approach has raised concerns about certain issues that DeFi opposes.
As the leading project in Decentralized Finance (DeFi), the Ethereum [ETH] community has taken it upon themselves to curb the incessant attacks in the ecosystem. Dubbed as the ERC-7265 or “circuit breaker”, the proposal which appeared on July 3, has seen many code commits between July 4 and 5.
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Time to stop the exploits
Pseudonymous developer Diyahir, who led the conversation, noted that the ERC-7265 standard would help temporarily halt outflows when a breach is detected.
And since it planned to build a circuit breaker structure, smart contracts could delay settlements and cool withdrawal attempts. The said proposal,
“This circuit breaker does not adopt the structure of the underlying protocol and primarily serves as a pass-through vehicle for token outflows.”
Over the past 365 days, several DeFi projects have suffered numerous flash loan exploits and attacks. And at the time of writing, it was $2.85 billion. This has led to questions about the safety of storing money there or trading through the networks.
When asked if ERC-7265 could actually reduce DeFi hacks, Nikolay Denisenko had this to say:
“Hackers are often able to abuse DeFi protocols due to their ability to drain money quickly before countermeasures can be taken. By building in a mechanism that can stop or limit the speed at which money can be withdrawn, the chance of large-scale theft can be significantly reduced.”
The web3 developer and Chief Technical Officer at Neobank BrightyApp also indicated that the risk of centralization should be considered. He added that this was necessary to ensure that the standard is not “misused”.
Issues to consider
Nevertheless, Ethereum has maintained a relatively high number of transactions. At press time, DefILLama revealed that daily transactions on the network had exceeded 900,000.
This suggests that there were market participants who still viewed the blockchain and DeFi in general as trustworthy to some degree. However, the net inflow was not as high as compared to September 2022.
Source: DefiLlama
Based on the multi-chain TVL aggregator data, the statistic was $10.91 million on July 4. This suggests that the ETH spent with each block has decreased since the To combineand investors may have remained cautious in interacting with the network.
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Robert Quartly, Chief Strategy Officer at Tier-1 exchange Bitrue also spoke to AMBCrypto about the matter.
According to Quartly, the proposal raises censorship and centralization issues that go against DeFi principles. As a result, he said the proposal could face resistance from the wider Ethereum community. He said,
“The proposal may face community opposition during development, even though the ERC-7265 standard offers an innovative approach to address DeFi hacks and looting.”
