{"id":19796,"date":"2023-07-07T07:13:50","date_gmt":"2023-07-07T07:13:50","guid":{"rendered":"https:\/\/nftandcrypto-news.com\/crypto\/eth-defi-circuit-breaker-could-cut-hack-losses-by-70-developer\/"},"modified":"2023-07-07T07:13:54","modified_gmt":"2023-07-07T07:13:54","slug":"eth-defi-circuit-breaker-could-cut-hack-losses-by-70-developer","status":"publish","type":"post","link":"https:\/\/nftandcrypto-news.com\/crypto\/eth-defi-circuit-breaker-could-cut-hack-losses-by-70-developer\/","title":{"rendered":"ETH DeFi ‘circuit breaker’ could cut hack losses by 70% \u2014 Developer"},"content":{"rendered":"

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A decentralized finance \u201ccircuit breaker\u201d could have prevented billions of dollars worth of crypto being stolen from DeFi protocols in 2022, according to the developer of the newly published ERC-7265 proposal.<\/p>\n

A new Ethereum request for comment (ERC) was published on Github on July 3. In it, the lead developer Diyahir Campos proposed a standard for a DeFi \u201ccircuit breaker.\u201d It essentially aims to set a standard for a smart contract with the ability to halt suspiciously large token outflows from a DeFi protocol.<\/p>\n

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1\/ Announcing ERC 7265: Circuit Breaker<\/p>\n

We are fixing the biggest problem with DeFi Security – lack of response time to mitigate hacks.<\/p>\n

Built by @Diyahir<\/a> @tcb_00<\/a> @real_philogy<\/a>https:\/\/t.co\/4KQDYEK2H7<\/p>\n

\u2014 Meir Bank (@MeirBank) July 3, 2023<\/a><\/p><\/blockquote>\n

Last year was the single biggest year for crypto hacks, with at least $3.1 billion stolen from DeFi protocols, 65% of that coming out of cross-chain bridges.\u00a0<\/p>\n

Speaking to Cointelegraph, Campos said circuit breakers could have prevented billions in losses. <\/p>\n

\u201cThe ones that weren\u2019t rugs, you could probably save 70% of the money […] with minimal impact to users.\u201d <\/p><\/blockquote>\n

Campos revealed he was one of the many that lost funds in the $195 million Euler Finance attack in March, which led to contagion that impacted 11 other protocols. <\/p>\n

\u201cActually, I was one of the depositors in the Euler hack,\u201d he said.<\/p>\n

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3\/ Our data analysis shows that DeFi Guardian could have saved more than 50% of losses from the recent @eulerfinance<\/a> hack.<\/p>\n

Instead of draining the entire TVL of Euler within moments, the Euler hacker would have been rate limited, saving tens of millions of dollars for users. pic.twitter.com\/Nuck06iQIo<\/a><\/p>\n

\u2014 Meir Bank (@MeirBank) June 1, 2023<\/a><\/p><\/blockquote>\n

\u201cFrom that experience, I\u2019m looking at the TVL charts and the transactions that happened and really it begged the question:\u201d<\/p>\n

\u201cWhy would you ever let 100% of your TVL leave in 10 seconds or five blocks?\u201d<\/p><\/blockquote>\n

A typical DeFi protocol would see around 20% of total value locked entering or leaving a project in a day. <\/p>\n

\u201cOnce you start talking 30% or 40%, that’s when you really start separating exploits versus daily usage,\u201d said Campos. <\/p>\n

The proposed standard has not been without controversy. DeFi researcher Chris Blec was among the skeptics on Twitter concerned the circuit breaker could be used for potentially nefarious purposes. <\/p>\n

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Oh dear Lord. What is this nonsense?<\/p>\n

Giving DeFi devs a protocol-level method that allows them to freeze your money forever?<\/p>\n

WHAT COULD POSSIBLY GO WRONG???<\/p>\n

(h\/t @DefiantNews<\/a>) pic.twitter.com\/RofYYv9Nud<\/a><\/p>\n

\u2014 Chris Blec (@ChrisBlec) July 6, 2023<\/a><\/p><\/blockquote>\n

Campos said the circuit breaker isn\u2019t right for every DeFi protocol and isn\u2019t a guarantee that a protocol is safe. He noted the circuit breaker would be an \u201copt-in thing\u201d for DeFi projects. <\/p>\n

He also believes that a well-designed circuit breaker will need to strike a balance between protecting users and preventing \u201cfalse positives,\u201d as it would be extremely disruptive whenever the breaker trips.<\/p>\n

Related: <\/em><\/strong>Multichain MPC bridge sees $100M+ outflows, sparking fears of exploit<\/em><\/strong><\/p>\n

However a circuit breaker would be useless in cases of internal rug pulls, as it could simply be deactivated by the team controlling the protocol. <\/p>\n

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A quick exploration of the power of circuit breakers in DeFi and their limitations in preventing costly hacks https:\/\/t.co\/bZKeWJyUkI<\/p>\n

\u2014 Diyahir (@Diyahir) June 27, 2023<\/a><\/p><\/blockquote>\n

Campos is a smart contract developer at Hydrogen Labs. He said work began on the proposed standard during an April hackathon in Tokyo, alongside Meir Banks, the co-founder of Hydrogen Labs. <\/p>\n

The idea for the DeFi circuit breaker was inspired by similar circuit breakers that have been used by global stock exchanges for decades.<\/p>\n

\u201cIn DeFi, we aren\u2019t trying to calm the markets which is the intention of the [New York Stock Exchange\u2019s circuit breaker] rather we want to prevent hack losses,\u201d wrote Campos in a June 27 blog post. <\/p>\n

Other developers working on the standard include Philippe Dumonet, founder and CEO of DeReg and Blagoj Dimovski, the co-founder and former CTO of Diagonal Fiance. <\/p>\n

Campos said the standard is still being shaped at this stage but is confident it will be ready \u201cwithin months\u201d which would put it in \u201ca really good stage\u201d to be integrated into protocols.<\/p>\n

Magazine:\u00a0<\/em><\/strong>Should you \u2018orange pill\u2019 children? The case for Bitcoin kids books<\/em><\/strong><\/p>\n<\/div>\n