Consensys-backed Linea integrates Phylax’s Credible Layer to proactively prevent smart contract exploits

Linea, the Ethereum Layer 2 developed by Consensys, is the first full blockchain to integrate Phylax Systems’ Credible Layer security technology designed to proactively mitigate smart contract exploits.

This makes Linea "the first major Ethereum L2 to go beyond simply flagging malicious transactions to actively preventing smart contract exploits at the infrastructure level," the company said in a release on Tuesday. 

Phylax is a crypto security startup that offers a novel way to secure blockchain applications and protocols. Its Credible Layer allows developers to preprogram rules — or “assertions” — into smart contracts to mitigate exploits. In short, it takes a page of the TradFi security book — namely, circuit breakers, which temporarily halt trading when triggered by sudden market drops — "rethinking it in such a way that a network can adopt it without shedding decentralization or neutrality," Odysseas Lamtzidis, founder and CEO of Phylax Systems, told The Block.

"The core thing here vs the other security solutions, is that this is explicitly preventative, not damage control (reactive)," Lamtzidis said. "The dapp doesn't have to find all the ways a hack can happen (like audits — the how), but can just define the unwanted end state (what hacked state means, e.g. a non admin took shares of another user from a vault)."

Consensys quotes one potential assertion, "this vault's balance cannot decrease," as the type of security measure that can now be ingrained in Linea-based applications, which will now automatically reject transactions that attempt to violate that rule. According to Declan Fox, Consensys' head of Linea, the Phylax integration will provide "baseline security capabilities" for Linea at the network level, "while individual dapps still define the specific rules they want enforced."

"Each rule is transparent and publicly verifiable, so users can clearly understand the protections in place," Fox said. "This makes Linea more flexible for everyone: builders who choose to embed these rules into their applications, and users who can opt into protocols that use such rules, or those that do not."

At launch, four Linea-based apps have already opted into the security system, including Euler, Malda, Denaria, and Turtle Club, with more expected to follow. 

Delineating security

Lamtzidis noted that Phylax is different from the current security paradigm, which is traditionally reliant on external monitoring or third-party validators. The Credible Layer, instead, functions as a core property of the blockchain, helping to block “entire categories of exploits,” like rounding error attacks and unauthorized minting.

“Users post their invariants on-chain, that works as an on-chain registry. A sidecar to the sequencer makes sure that any tx that lands on-chain doesn't break these invariants or rules,” Lamtzidis said, adding that the "sequencer is neutral ... by being unable to arbitrarily enforce assertions, only respect the on-chain registry."

“We set out to build a completely new type of on-chain security primitive. One that would prevent hacks outright, without requiring its users to compromise on being permissionless or decentralized,” Lamtzidis said. 

According to Fox, despite in some sense being an overhaul of Linea's security gaurantees, the integration "was actually pretty quick," due to Linea's modular architecture using Besu, which allows for easy customization. "We had to make sure these additional security checks could run at scale, on every transaction, while keeping latency and costs in line with what users and dapps expect from a ZK Layer 2," he said.

The point was echoed by Lamtzidis, who noted for developers it can be difficult "to identify all the different ways the code can interact both internally in the system (e.g. the lending protocol) or externally (e.g. oracle feed)," even if the invariant preprogrammed rules are simple statements. 

Institutional guarantees

Fox noted the move is aligned with Linea's broader mandate to attract institutional capital and use cases, which is slowed by the ongoing risk of crypto hacks. According to The Block’s data, more than $5 billion has been lost to DeFi hacks to date.

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"For institutional capital to flow into DeFi at scale, we need to move beyond reactive security models," Fox said. "Institutions don't operate in environments where they detect problems after they occur, they require infrastructure that makes certain failure modes impossible."

"By reducing the risks of smart contract malfunctions, this integration makes earning DeFi yield on Linea safer for users and protocols. This makes it a strategic integration that aligns with both our product and business roadmap," Fox added.

Lamtzidis noted that Phylax’s Credible Layer will be Clarity Act compliant because its sequencer is “neutral,” referring to the U.S. market structure draft legislation that could introduce decentralization standards for L2s. These “deterministic, auditable controls” will help institutions meet their compliance requirements, Fox said, "while also protecting everyday DeFi users who want assurance that protocols won't be exploited."

Linea’s token generation event occurred late last year.