# Technical audits are not enough: Economic risks in DeFi

- Channel: [ETHTokyo](https://streameth.org/ethtokyo)
- Date: 2024-09-03
- Duration: 18:21
- Topics: blockchain, security, ethereum, defi, audits
- Watch: https://streameth.org/watch/66d7a15335d51347e0a18d23

## Description

This talk will be diving into what economic exploits are and how most of them are executed in the Ethereum ecosystem. The video features Varun Doshi, the lead engineer at ChainRisk Labs, discussing the importance of blockchain security and differentiating between technical and economic security within the blockchain space. He begins by engaging the audience with a prompt about 'Blockchain security' to highlight common associations with vector attacks. Varun then introduces his firm, ChainRisk Labs, which specializes in both technical and economic audits for various big-name partners in the industry.

He presents data showing Ethereum's dominance in Total Value Locked (TVL) and its correlation with the highest number of exploits due to its liquidity. Varun emphasizes that economic audits are crucial as they simulate real-world scenarios under stress to identify potential economic risks that can affect decentralized finance (DeFi) protocols.

He explains that economic audits consider market conditions, ripple effects across protocols, risk parameters, incentive structures, inter-protocol dependencies, and governance weaknesses. Varun points out that most exploits are economically driven rather than technical and highlights the scarcity of firms specializing in economic security despite a significant market opportunity.

Varun contrasts technical audits with economic audits by explaining that while technical issues involve code loopholes and atomic operations without initial investment from attackers, economic issues often involve valid code but can be exploited through complex processes requiring significant initial investment from attackers.

Lastly, he notes that