The proposal puts forward an âopt-inâ token standard that would enable victims to report theft to a governance contract, with algorithms helping to identify and freeze ill-gotten gains.
Stanford University researchers have come up with a prototype for âreversible transactionsâ on Ethereum, arguing it could be a solution to reduce theimpact of crypto theft.
In a Sundaytweet, Stanford University blockchain researcher Kaili Wangshareda rundown of the Ethereum-based reversible token idea, noting that at this stage, it is not a finished concept but more of a âproposal to provoke discussion and even better solutions from the blockchain community,â noting:
âThe major hacks we've seen are undeniably thefts with strong evidence. If there was a way to reverse those thefts under such circumstances, our ecosystem would be much safer. Our proposal allows reversals only if approved by a decentralized quorum of judges.â
The proposal was put together by blockchain researchers from Stanford, including Wang, Dan Boneh and Qinchen Wang, and it outlines âopt-in token standards that are siblings to ERC-20 and ERC-721â dubbed ERC-20R and ERC-721R.
However, Wangclarifiedthat the prototype was not to replace ERC-20 tokens or make Ethereum reversible, explaining that it is an opt-in standard that âsimply allows a short time window post-transaction for thefts to be contested and possibly restored.â
Under the proposed token standards, if someone has their funds stolen, they can submit a freeze request on the assets to a governance contract. This will then be followed up by a decentralized court of judges that need to quickly vote âwithin a day or two at mostâ to approve or reject the request.
Both sides of the transaction would also be able to provide evidence to the judges so that they have enough information, in theory, to come to a fair decision.
Fornonfungible tokens (NFTs), the process would be relatively straightforward as the judges just need to see âwho currently owns the NFT, and freeze that account.â
However, the proposal admits that freezing fungible tokens is much more complicated, as the thief can split the funds among dozens of accounts, run them through an anonymouscrypto mixeror exchange them for other digital assets.
To counter this, the researchers have come up with an algorithm that provides a âdefault freezing process for tracing and locking stolen funds.â
They note that it ensures that enough funds in the thiefâs account will be frozen to cover the stolen amount, and the funds will only be frozen if âthereâs a direct flow of transactions from the theft.â
Wangâs Twitter post generated a lot of discussion, with a mixed bag of people asking further questions, supporting the idea, refuting it or putting forward ideas of their own.
Prominent Ether (ETH) bull andpodcaster Anthony Sassanowasnât a fan of the proposal, tweeting to his 224,300 followers that âIâm all for people coming up with new ideas and putting them out into the ether but I'm not here for TradFi 2.0. Thanks but no thanksâ
Discussing the idea further with people in the comments, Sassano explained that he thinks that reversal control and consumer protections should be placed on the âhigher layersâ such as exchanges, and companies rather than the base layer (blockchain or tokens), adding:
âDoing it at the ERC20/721 level would basically be doing it at the âbase layerâ which I don't think is right. End-user protections can be put in place at higher levels such as the front-ends.â
https://cointelegraph.com/news/reversible-transactions-could-mitigate-crypto-theft-researchers