A formal framework for the economic security of DeFi compositions

2026-06-03

AI Summary

This work addresses the economic security risks in DeFi compositions arising from smart contract interactions by proposing a formal framework to ensure their economic safety. The core innovation lies in introducing “MEV non-interference” as a security definition and the notion of “local MEV,” enabling modular and localized reasoning about economic attacks. Combining formal verification, game-theoretic modeling, and principles of locality, the approach analyzes a range of DeFi protocols under both bounded and unbounded adversary wealth models. The framework has been successfully applied to representative DeFi compositions—including exchanges, automated market makers (AMMs), options protocols, and lending pools—effectively distinguishing secure from vulnerable structures and thereby providing both a theoretical foundation and practical tools for assessing economic security in DeFi ecosystems.

Abstract

Decentralized Finance (DeFi) services are usually constructed by composing a variety of smart contracts. While composability is a key driver of the success of DeFi, it also creates security risks: adversaries may exploit interactions between newly deployed contracts and the pre-existing ones to inflict economic losses. We introduce MEV non-interference, a formal security notion for DeFi composability requiring that the maximal extractable value from a set of newly deployed contracts is not increased by interactions with the existing blockchain state. To support this notion, we define local MEV, a novel measure of economic attacks that focusses on the loss of a given set of victim contracts. We study two adversarial models, with bounded and unbounded wealth, and establish sufficient conditions and locality principles that enable modular reasoning about secure composability. We apply the framework to representative DeFi compositions, including exchanges, AMMs, options, lending pools, routers, and arbitrage contracts, showing how it distinguishes secure compositions from vulnerable ones. Our results provide a formal foundation for reasoning about the economic security of DeFi compositions.

Problem

• DeFi composability
• economic security
• MEV
• smart contracts
• formal framework

Innovation

• MEV non-interference
• local MEV
• DeFi composability
• formal security framework
• economic security