DeFi Security Guide: How to Effectively Defend Against Hacker Attacks in the AI Era?

Writing: sysls

Compilation: AididiaoJP, Foresight News

Introduction

After learning about numerous DeFi protocol hacking incidents, I have developed a fear of “state actors.” They are highly skilled, well-resourced, and play an extremely long-term game; these supervillains focus on scrutinizing every corner of your protocol and infrastructure for vulnerabilities, while ordinary protocol teams are distracted by six or seven different business directions.

I don’t claim to be a security expert, but I have led teams in high-risk environments (including military and high-stakes finance), with extensive experience in thinking through and planning emergency responses.

I sincerely believe that only paranoids can survive. No team starts out thinking “I will be indifferent and negligent about security”; yet hacks still happen. We need to do better.

AI Means This Time Is Truly Different

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Hacking incidents are not rare, but their frequency is clearly increasing. Q1 2026 is the record quarter for DeFi hacks, and with Q2 just beginning, it already looks poised to break that record.

My core hypothesis: AI drastically reduces the cost of finding vulnerabilities and greatly expands the attack surface. Humans need several weeks to review configurations of a hundred protocols for misconfigurations; the latest foundational models can do it in just a few hours.

This should fundamentally change how we think about and respond to hacking threats. Old protocols that rely on security measures before AI becomes powerful are increasingly at risk of being “秒杀” (instant kill).

Thinking in Surface and Hierarchies

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The surface area of hacking can be boiled down to three: protocol teams, smart contracts and infrastructure, and user trust boundaries (DSN, social media, etc.).

Once these surfaces are identified, layered defenses can be stacked:

Prevention: Strict enforcement of processes to minimize the probability of exploitation.

Mitigation: When prevention fails, limit the damage.

Pause: No one can make optimal decisions under extreme pressure. Once an attack is confirmed, immediately activate the kill switch. Freezing can prevent further losses and buy time for thinking…

Reclaim: If control over toxic or compromised components is lost, abandon and replace them.

Recovery: Regain what was lost. Pre-plan partnerships with institutions capable of freezing funds, reversing transactions, and assisting investigations.

Principles

These principles guide specific actions for each layer of defense.

Use Cutting-Edge AI Extensively

Leverage advanced AI models to scan your codebase and configurations for vulnerabilities, and conduct broad surface red-team testing: try to find front-end exploits that could reach the backend. Attackers do this. Defensive scans that you can detect are already being probed by offensive scans.

Use skills like pashov, nemesis, and AI platforms such as Cantina (Apex) and Zellic (V12) for rapid codebase scanning before full audits.

Time and Friction Are Good Defenses

Add multiple steps and time locks to any potentially damaging operation. You need enough time to intervene and freeze when anomalies are detected.

Past objections to time locks and multi-step setups were that they cause friction for protocol teams. Now, with AI, you don’t need to worry much: AI can easily click through these frictions in the background.

Invariants

Smart contracts can be defensively built by writing immutable “facts”: if these facts are broken, the entire protocol logic collapses.

Typically, only a few invariants exist. Elevate them carefully into code; enforcing multiple invariants in every function becomes unmanageable.

Power Balance

Many hacks originate from compromised wallets. You need configurations that, even if multi-sig is breached, can quickly contain damage and bring the protocol back to a governance decision-making state.

This requires balancing between Governance (deciding everything) and Rescue (restoring governance stability without replacing or overturning governance itself).

Problems Will Always Occur

Start with the assumption: no matter how smart you are, you will be hacked. Your smart contracts or dependencies may fail. Social engineering attacks can succeed, and new upgrades may introduce unforeseen vulnerabilities.

Thinking this way, rate limiting damage and having circuit breakers to lock down the protocol become your best friends. Limit damage to 5-10%, then freeze and plan your response. No one can make perfect decisions in a hail of bullets.

The Best Time to Plan Is Now

Think through your response before being hacked. Encode processes as much as possible and rehearse with your team so you won’t panic when the attack hits. In the AI era, this means having skills and algorithms that can quickly present large amounts of information, summarized and shared in both digestible and detailed formats with your core circle.

You don’t need perfection, but you must survive. No system is invulnerable from day one; through iterations, you will become resilient by learning from lessons.

Absence of evidence of being hacked does not mean you won’t be. The greatest comfort zone is often the greatest danger zone.

Preventive Measures

Smart Contract Design

Once invariants are identified, elevate them to runtime checks. Carefully consider which invariants are truly worth enforcing.

This is the FREI-PI (Function Requirements, Effects, Interactions, Protocol Invariants) pattern: at the end of each function that touches value, re-verify the invariants that the function promises to maintain. Many exploits involving CEI (Checks-Effects-Interactions) patterns—like flash loan sandwich attacks, oracle-assisted liquidations grief, cross-function insolvency—can be caught by invariant checks at function end.

Good Testing

Stateful fuzzing generates random call sequences over the protocol’s full public surface, asserting invariants at each step. Most production vulnerabilities are multi-transaction, and stateful fuzzing is nearly the only reliable way to discover these paths before attackers do.

Use invariants to assert properties across all sequences generated by the fuzzer. Coupled with formal verification, it can prove properties hold in all reachable states. Your crown invariants should definitely accept this approach.

Oracles and Dependencies

Complexity is the enemy of security. Every external dependency expands the attack surface. When designing primitives, give users the choice of whom and what to trust. If dependencies cannot be eliminated, diversify them so no single point of failure can destroy your protocol.

Extend audit scope to simulate oracle and dependency failure modes, and impose rate limits on potential disasters if they fail.

The recent KelpDAO vulnerability is an example: they inherited the LayerZero default requiredDVNCount=1, which was outside their audit scope. The breach was in off-chain infrastructure beyond their audit coverage.

Surface Attacks

Most surface attack vectors in DeFi have already been listed. Check each category, ask if it applies to your protocol, and implement controls against that vector. Cultivate red-team skills, and let your AI agents actively seek vulnerabilities in your protocol; this is now a basic requirement.

Native Rescue Capabilities

In governance based on voting, power initially concentrates in the multisig team, which takes time to diffuse. Even with broad token distribution, delegation often centralizes authority in a few wallets (sometimes just one). When these wallets are compromised, the game is over.

Deploy “Guardian Wallets” with strict, narrow permissions: they can only pause the protocol, and at a threshold of >=4/7, they can, in extreme cases, rotate the compromised delegation to predefined replacement wallets. Guardians can never execute governance proposals.

This provides a rescue layer that can always restore governance stability without the power to overturn governance. The probability of losing >=4/7 of guardians is extremely low (considering holder diversity), and once governance matures and disperses, this layer can be phased out.

Wallet and Key Topology

Multisig wallets are fundamental, with a minimum of 4/7 signatures. No single person controls all 7 keys. Rotate signers frequently and silently.

Keys should never interact with daily-use devices. If you use a signing device to browse the internet, send emails, or open Slack, consider that signer compromised.

Have multiple multisigs, each for different purposes. Assume at least one full multisig will be breached, and plan from there. No individual should have enough control to break the protocol, even under extreme scenarios (kidnapping, torture, etc.).

Consider Bounties

If resources permit, set a high bounty for vulnerabilities relative to your protocol’s TVL; even smaller protocols should offer as generous a bounty as possible (e.g., low 7-8 figures).

If facing state actors, they may refuse to negotiate, but you can still participate in “white hat bounty” programs, authorizing white hats to act on your behalf to protect funds, and take a percentage of the bounty as a fee (paid by depositors).

Find Good Auditors

I previously argued that as large language models become smarter, the marginal value of hiring auditors declines. I still hold that view, but with some nuance.

First, good auditors stay ahead of the curve. If you’re doing something novel, your code and vulnerabilities may not be in their training data. Merely increasing token counts has not proven effective at discovering new vulnerabilities. You don’t want to be the first to have a unique vulnerability.

Second, an underrated benefit: hiring auditors is a reputation guarantee. If they sign off and you get attacked, they are strongly incentivized to help. Building relationships with security professionals is a huge advantage.

Operational Security in Practice

Treat operational security as a success metric. Conduct phishing drills; hire (trusted) red teams to attempt social engineering attacks on your team. Prepare backup hardware wallets and devices to replace the entire multisig if needed. You don’t want to scramble to buy these on D-day.

Mitigation Measures

Your exit path is the loss cap

Any path that moves value out of the protocol should have a capped maximum loss. Simply put: a mint function without per-block limits is a blank check for infinite minting exploits. A redemption function without weekly limits is a blank check for asset balance damage.

Carefully consider clear numerical limits for your exit paths. This number must balance your maximum tolerable damage and extreme user UX needs. When things go wrong, this is what can save you from total destruction.

Whitelists (and Blacklists)

Most protocols have lists of addresses that can be called, transacted with, or received, and lists of users who are explicitly forbidden. Even if implicit, these are trust boundaries and should be formalized.

Formalizing them allows for two-step setters, creating meaningful friction. Attackers must first add to the whitelist (or remove from blacklist) before acting. Having both means attackers must break two processes: the market must allow (listing/integration), and the action must not be prohibited (security review).

Reclaim

Algorithm Monitoring

Without human oversight, kill switches are useless. Off-chain monitors should continuously check invariants and algorithmically escalate alerts if issues are detected. The final path should reach human guardians with enough context to make decisions within minutes.

Pause and Recalibrate

If you are compromised, first stop the bleeding, not make decisions in a countdown. For protocols, this is the kill switch (also UI-visible): a button that pauses all value-moving paths in one transaction. Prepare a “pause everything” auxiliary script that enumerates all pausable components and atomically pauses them.

Only governance can lift the pause; the kill switch cannot pause governance contracts themselves. If guardians can pause governance, a breached guardian layer could permanently deadlock recovery.

Activate Your War Room

Freeze, stop the bleeding, then bring all trusted parties (small circle, pre-agreed) into a communication channel. Keep it small to prevent leaks to attackers, the public, or malicious arbitrageurs.

Role-play for team members: decision-maker; operator skilled in executing defense scripts and pauses; someone to reconstruct vulnerabilities and identify root causes; a communicator with key stakeholders; a record-keeper of observations, events, and decision timelines.

When everyone knows their role and has rehearsed, you can respond systematically rather than panic at the worst moment.

Consider Chain Reactions

Assume your attacker is highly sophisticated. The first vulnerability may be a decoy or a seed for subsequent attacks. Attacks might be designed to induce you to do something completely wrong, triggering the real exploit.

Pauses must be thoroughly researched, fully controllable, and not exploitable themselves. Pausing should be a full protocol freeze: you don’t want to be tricked into pausing one component and opening another. Once root causes and attack vectors are identified, explore adjacent exposed surfaces and chain reactions, fixing everything at once.

Rotate Pre-committed Successors

Only with prior knowledge of successors is rotation safe. I like the idea of a pre-committed successor registry: it makes it harder for attackers to replace healthy guardians/governance wallets with compromised ones. This aligns with the “whitelist/blacklist” concept in mitigation.

Register a successor address for each key role. The only emergency primitive for rotation is “replace role X with its successor.” This also allows for due diligence during normal times: take it slow, do background checks, and meet with the person requesting the change.

Test Carefully Before Upgrading

Once root causes and impact are understood, you need to deploy upgrades. This may be the riskiest code you write—under pressure, targeting attackers who already know your protocol well and have found vulnerabilities.

Delay deployment without thorough testing. If time for audits is lacking, rely on white hat relationships or set up a 48-hour pre-deployment challenge for adversarial review.

Recovery

Act Fast

Stolen funds have a half-life; once the breach lands, they quickly enter laundering channels. Prepare in advance with on-chain analysis providers like Chainalysis to track attacker address clusters in real-time, and notify exchanges for tagging and tracing as they cross chains.

Pre-arrange a list of third-party contacts—exchange compliance teams, cross-chain bridge admins, custodians, and others with authority to freeze cross-chain messages or specific in-transit deposits.

Negotiate

Yes, it’s painful, but you should still try to communicate with attackers. Many things in life can be resolved through negotiation. Offer time-limited white hat bounties and publicly state that if funds are fully returned before the deadline, no legal action will be taken.

If facing state actors, luck may be against you, but you might be dealing with less sophisticated attackers who simply exploited your vulnerabilities and want to exit at lower cost.

Always have legal counsel present before doing this.

Conclusion

Hacks won’t stop, and as AI gets smarter, attacks will only increase. Merely making defenders “more alert” is not enough. We need to use the same tools as attackers—red team our protocols, continuously monitor, and impose hard limits on damage—so we can survive even in the worst cases.