Irreversibility of transactions is one of the basic principles of blockchain networks, which provides the security of exchanges by preventing the possibility of fraud. However, a group of Stanford University researchers have introduced a prototype method for creating reversible transactions in Ethereum, and believe that this method could be a solution to reduce the destructive effects of cryptocurrency theft.
To Report Cointelegraph, Kaili Wang, a blockchain researcher at Stanford University, shared the idea of using a reversible Ethereum token in a tweet on September 25. Pointing out that the idea is not yet complete, he said the purpose of this proposal is to get people to discuss and come up with better solutions in the blockchain community.
There is strong evidence that big hacks that [تاکنون] We have seen, without a doubt, they were a form of theft. If there is a way to reverse those thefts in such situations, our ecosystem will be much safer. Our proposed scheme allows reversal (transaction) only if approved by a quorum of decentralized judges.
The proposal was compiled by blockchain researchers from Stanford, including Wang, Dan Boneh, and Qinchen Wang. This proposal introduces the ERC-20R and ERC-721R token standards, which are the same family of Ethereum’s ERC-20 and ERC-721 tokens.
However, Wang clarified that the prototype is not a replacement for ERC-20 tokens and does not currently make Ethereum transactions reversible. He explained that this plan is an optional standard that simply allows for the challenge of thieves and the possible recovery of (stolen) funds within a short period of time after the transaction.
Under the proposed token standards, if an individual’s capital has been stolen, they can file a request to freeze their assets in a governance agreement. Then this issue will be reviewed by a decentralized court of judges who will vote to approve or reject the request quickly and within a maximum of one or two days.
Also, both parties to the transaction can present evidence to the judges so that they have enough information to make a fair decision. This review process is relatively simpler for NFTs, as judges only need to see who currently owns the NFT and block that account.
However, the proposal acknowledges that blocking (wallet addresses) of regular (like) tokens is much more complicated, as a thief can split funds between dozens of accounts, use a cryptocurrency mixer, or exchange them for other assets.
To solve this problem, the researchers proposed an algorithm that provides a default blocking process to track and lock the stolen funds. They emphasize that this algorithm will ensure that sufficient funds to cover the stolen amount are blocked in the thief’s account. These funds will only be blocked if there is a direct transaction flow from the theft.
Wang’s Twitter post caused a lot of discussion. A group of people asked more questions, supported or rejected the idea, or offered their own ideas.
Anthony Sassano, a famous podcaster and fan of Ethereum, wrote against this plan:
I’m always a fan of people coming up with new ideas about Ethereum and publishing it, but I’m not here to launch a new version of traditional finance (an allusion to the reversal of transactions on the blockchain).
After discussing the idea with various people, Sassano explained that the idea of creating Ethereum’s reversible transactions and consumer support should be placed at higher layers such as exchanges and companies instead of at the base layer (blockchain or tokens).
Doing this at the level of ERC-20 and ERC-721 tokens is basically doing it at the base layer of the blockchain, which I don’t think is right. End-user protection can be done at higher levels such as front-end layers (exchanges).