Nervos and IOHK have come together to combat DeFi hacks by launching a new project.
According to a report, Nervos and IOHK, the development team behind Cardano, have joined forces to launch a research project that will improve smart contract security. Through the initiative, the security of smart contracts will be improved by the enhancement of Unspent Transaction Outputs (UTXOs).
About the Initiative
UTXOs are one of the most popular accounting methods that the Bitcoin network has adopted. Nervos and IOHK will feature as co-authors in research papers that explain how to make improvements to UTXO models. These papers will look into how future developments will be open source and also exploring how a universal standard can be created for the UTXO models.
Nervos and Cardano will partner with other blockchains that are based on UTXO. Such blockchains will collaborate with each other in regards to development, education, and research in the blockchain industry.
The Capabilities of UTXO
With reliable UTXO models, the unspent transaction of a user can be monitored across all their accounts. An UTXO is capable of tracking every single transaction made by a user. This makes it a more secure and reliable alternative to other account-based accounting methods that smart contract-based blockchains like Ethereum make use of.
The reason why Nervos and IOHK are focusing on UTXOs is that accounting methods that are account-based are more susceptible to attacks, especially for decentralized finance (DeFi) protocols. This is because such methods monitor the overall balance available in the account of a user but do not keep track of individual transactions that happen within the account, unlike an UTXO model.
Nervos co-founder Kevin Wang told Coindesk, “UTXOs are superior to account models in many ways and provide improved security, privacy, and scalability, all of which are critical for DeFi.”
Besides, Nervos and IOHK have chosen to make use of modified versions of UTXOs for their own individual blockchains. Both projects will share proprietary information that will work towards the improvement of the UTXO accounting method.
A report issued by CipherTrace, a blockchain analytics and cryptocurrency intelligence company, stated most projects on DeFi are dependent on unaudited smart contracts, which have vulnerabilities that bad actors and hackers can exploit. The report notes that hacks of DeFi projects this year have been staggering. The report states, “In first six months of 2020, 45% of all thefts were DeFi hacks, equating to about $51.5M—40% of hacked volume for that time period.”
The report from CipherTrace adds, “So far, in second half of 2020, DeFi has dominated 50% of all thefts, equally roughly $47.7M—14% of hacked volume for this time period.” The lower percentage in hacked volume is due to the massive KuCoin hack of $281 million as the exchange is centralized, thus skewing the numbers a bit.
As of the time of publication, Cardano (ADA) price is $0.154436 with a 24-hour trading volume of $960,864,339. ADA price also went up by 1.3% over the last 24 hours. ADA has a circulating supply of 31.1 billion coins and a max supply of 45 billion. ZBG is the current most active market trading ADA.