The proposal introduces an “opt-in” token standard that allows victims to report theft on a government contract, with algorithms that help identify and freeze ill-gotten gains.
Stanford University researchers have devised a prototype for “reversible transactions” on Ethereum, claiming it could be a solution to reduce the impact of cryptocurrency theft.
In a tweet on Sunday, Stanford University blockchain researcher Kaili Wang shared a summary of the Ethereum-based reversible token idea, noting that it is not a finished concept at this stage, but rather a “proposal to drive discussion and even better solutions of the blockchain community,” noted:
“The main attacks we have seen are undoubtedly robberies with solid evidence. If there was a way to reverse these thefts in such circumstances, our ecosystem would be much safer. Our proposal allows reversals only if they are approved by a decentralized quorum of judges .
The proposal was created by Stanford blockchain researchers, including Wang, Dan Boneh, and Qinchen Wang, and describes “opt-in token standards that are siblings of ERC-20 and ERC-721,” called ERC-20R and ERC-721R. .
Billions in stolen crypto. If we can’t stop the theft, can we reduce the harmful effects?
Over the past few months, several @Stanford researchers and I have mined and prototyped ERC-20R/721R to support reversible transactions on #Ethereum .
Check out the post at: https://t.co/38Hs0F9goU
— kaili.eth (@kaili_jenner) September 24, 2022
However, Wang clarified that the prototype did not replace ERC-20 tokens or make Ethereum reversible, explaining that it is an optional standard that “simply allows a short post-transaction window of time for theft to be contested and possibly restored “.
Under the proposed token standards, if someone has their funds stolen, they can submit an asset freeze request to a government contractor. This will then be followed by a decentralized court of judges who will have to vote quickly “within a day or two at most” to approve or reject the request.
Both sides of the transaction could also provide evidence to the judges so that in theory they have enough information to reach a fair decision.
For non-fungible tokens (NFTs), the process would be relatively simple, as the judges would only need to see “who currently owns the NFT and freeze that account.”
However, the proposal admits that freezing fungible tokens is much more complicated, as the thief can split the funds between dozens of accounts, run them through an anonymous crypto mixer or exchange them for other digital assets.
To counter this, the researchers developed an algorithm that provides a “standard freezing process to track and block stolen funds.”
They note that it ensures that enough funds are frozen in the thief’s account to cover the stolen amount, and the funds are only frozen when “there is a direct flow of transactions from the thief.”
I will address other comments en masse:
– If you think this is an incomplete solution, you are absolutely right. Our paper offers some pieces of the puzzle (it focuses on the mechanics), but we mention many open questions around decentralized government. That room needs work.
— kaili.eth (@kaili_jenner) September 25, 2022
Wang’s post on Twitter generated a lot of discussion, with a mix of people asking more questions, supporting the idea, rejecting it or coming up with their own ideas.
Related: UK government introduces bill to allow authorities to ‘seize, freeze and recover’ cryptocurrencies
Bull and podcaster Anthony Sassano was not a fan of the proposal, tweeting to his 224,300 followers that “I’m all for people coming up with new ideas and putting them out on the air, but I’m not here for TradFi 2.0 . Thanks but no thanks”
I’m all for people coming up with new ideas and putting them out there, but I’m not here for TradFi 2.0.
Thanks but no thanks https://t.co/pdSIB5Ib05
— sassal.eth (@sassal0x) September 25, 2022
Discussing the idea further with people in the comments, Sassano explained that he thinks rollback control and consumer protection should be placed in the “upper layers” such as exchanges and stores rather than the base layer (blockchain or tokens). , and I add:
“To do it at the ERC20/721 level would essentially be doing it at the ‘base layer,’ which I don’t think is right. End-user protections can be implemented at higher levels