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Definition proxy riskmutable contract risk

Upgradeability Risk

The risk that the code holding your funds can be replaced with different code after you have deposited.

Upgradeable contracts use a proxy pattern: users interact with a permanent proxy address that stores the assets and forwards calls to a separate implementation contract whose address an administrator can change. This exists for a good reason, since bugs are otherwise unfixable, but it means the code a user reviewed is not necessarily the code that will run tomorrow. The main mitigations are timelocks giving users a published window to exit before a new implementation activates, restricting who may upgrade, and eventually freezing the implementation. Readers can check whether an address is a proxy and who controls the upgrade on a block explorer, alongside any timelock delay.

In practice

Verifying source code on a block explorer confirms what the current implementation does; it says nothing about what the administrator may deploy next unless a timelock is in force.

The common misunderstanding

That reading and verifying a contract's source protects you, when a contract behind an upgradeable proxy can have its logic swapped for something entirely different.

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Related terms

Admin Key Risk The risk created when a small group holds keys able to change, pause, or drain a protocol that…
Governance Attack Acquiring enough voting power in a protocol to pass a proposal that hands its assets or its…
Protocol Emergency Pause A built-in switch letting designated parties freeze some or all of a protocol's functions during an…
Smart Contract Risk The risk that the code running a blockchain application behaves differently from what users expect,…
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