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Defense systems are needed to prevent catastrophic failures of a power grid due to cascaded events. Cascaded events can be attributed to improper operations of protective relays. The most challenging problem for the design and implementation of a defense system is the performance in accuracy and speed in a real-time environment. Protective devices are normally designed to operate fast in order to isolate the fault(s). This paper proposes a new methodology to distinguish line overloads from actual faults for distance relays. In order to distinguish between line flow transfers from a line outage and an actual fault, the line outage distribution factor (LODF) and generation shift factor (GSF)-based power flow estimation method, and a secure peer-to-peer (P2P) communication structure are adopted. Computer simulations of cascaded events for a six-bus system and the Korean power grid have been performed to establish the feasibility of the proposed scheme.