The Ethereum community has proposed a new standard, ERC-7265, to address DeFi hacks within the ecosystem. This standard aims to mitigate vulnerabilities in the protocol.
Ethereum is a blockchain-based platform known for running smart contracts. These contracts ensure secure and fraud-free execution of transactions, without the need for intermediaries. With a market capitalization second only to Bitcoin, Ethereum is one of the largest cryptocurrencies.
The Ethereum blockchain operates as a distributed ledger, ensuring transparency, security, and immutability of recorded transactions. Each node in the network maintains a copy of the entire blockchain, making it incredibly challenging to hack or compromise.
The development of the Ethereum blockchain has introduced two important proposal types: ERCs (Ethereum Requests for Comment) and EIPs (Ethereum Improvement Proposals).
ERCs, short for Ethereum Requests for Comments, are proposed standards that outline how specific features or functionalities should be implemented on the Ethereum network. Their purpose is to ensure compatibility between new tokens and smart contracts with the Ethereum network.
On the other hand, EIPs, or Ethereum Improvement Proposals, involve submitted changes and enhancements to the Ethereum protocol itself. The goal of EIPs is to enhance the efficiency, security, and scalability of the Ethereum network.
The ERC-7265 proposal includes a crucial feature called a “circuit breaker.” This feature allows DeFi protocols on the Ethereum blockchain to reverse token transfers in the event of a hack.
According to Chainalysis, the value of DeFi hacks reached $3.1 billion in 2022, surpassing the previous year’s figures. Furthermore, Ethereum suffered a loss of $221 million in Q1 of 2023.
Meir Bank, a developer, explained that the implementation will facilitate fund recovery in the event of hacks. However, he expressed concerns about DeFi protocols built on Ethereum that will adopt the update.
Another community member, EnbangWu, noted that the proposal grants additional roles to Admin, allowing them to perform functions like updating AssetParams, overriding RateLimit, and initiating GracePeriod. This raises concerns as it contradicts the decentralized nature of the blockchain.
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