How Does On-Chain Governance Attempt to Address Smart Contract Vulnerability Risks?
On-chain governance allows token holders to vote on proposals that can update, pause, or modify a smart contract in response to a vulnerability or bug. While the contract itself is immutable, governance can control certain parameters or trigger an emergency shutdown function embedded in the code.
This provides a decentralized mechanism for damage control and upgrades, balancing immutability with necessary adaptability.
Glossar
Emergency Shutdown Function
Function ⎊ The Emergency Shutdown Function (ESF) within cryptocurrency derivatives and options trading represents a pre-programmed, automated response mechanism designed to mitigate catastrophic risk exposure.
Vulnerability
Exposure ⎊ Vulnerability within cryptocurrency, options, and derivatives manifests as quantifiable risk to capital stemming from imperfectly hedged positions or systemic dependencies.
Smart Contract Vulnerability
Exploit ⎊ Within decentralized finance (DeFi) and cryptocurrency derivatives, an exploit represents the successful leveraging of a smart contract vulnerability to illicitly extract value or disrupt intended functionality.