On-Chain Token Verification: A Feasibility Study

Decentralized Finance (DeFi) continues to grow in popularity, with a total value locked of $140B as of December 2024. A particular challenge is the detection of so called trap door tokens, while existing off-chain mechanisms effectively identify such threats, most DeFi users cannot apply these tools. On-chain solutions are the only way to ensure universal protection. This paper examines the feasibility of on-chain token verification mechanisms, highlighting the challenges of adopting these strategies and proposing alternative solutions to enhance user trust in DeFi applications.The proposed solutions are: 1) standardizing tokens for gas-efficient, quick verification, and 2) token certification, involving off-chain auditing with fully on-chain verification. This study demonstrates the feasibility of these approaches, showing that low gas consumption is achievable on the Ethereum blockchain, marking a novel contribution in this area.