News - Ethereum: New token standard aims to prevent fraud
More than $600 million in tokens have been stolen from the DeFi industry this year alone. Whether through faulty programming or intentional manipulation, holes in the security of " smart contracts" can, at worst, result in a loss for investors. Ethereum developers want to counter this with a new token standard - smart contracts could receive a verification stamp in the future.
There is a saying in the crypto space, "Don't trust, verify." However, it doesn't work entirely without trust. At best, smart contracts, especially those securing large sums of money, are audited by independent experts. So far, however, these audits can only be checked manually and not directly on the blockchain.
In the future, the ERC-7512 token standard will allow direct on-chain tracking of these tests. Smart contracts will have a seal of sorts and the tokens will then contain information about who performed the audits, what criteria were checked and what the results were. Audits could thus be verified directly on the blockchain, potentially mitigating many risks associated with faulty smart contracts.
"To provide strong security guarantees and enable better composability, the ability to verify on-chain that a contract has been audited is important," say the token standard's developers. A system "that can verify that an audit has been performed at a specific address will strengthen the security guarantees of the entire smart contract ecosystem."
In light of the fact that more and more applications are moving to smart contracts, and decentralized financial applications are securing higher and higher amounts, the token standard "could be an important building block for creating security systems for smart contracts." Especially for bridges that transfer tokens between blockchain applications, which are often vulnerable to errors. However, the token standard is no guarantee that a smart contract will not contain errors, the developers said.
The proposal was submitted by a group of Ethereum developers. Those involved are Safe, Ackee Blockchain, OtterSec, ChainSecurity, OpenZeppelin and Hats Finance. Whether ERC-7512 will be adopted and implemented as a standard is not yet known.