Have hackers just robbed your precious Boring monkey NFT? There may be a new token standard for that.
Stanford researchers Kaili Wang, Qinchen Wang and Dan Boneh recently drawn a fresh proposal for two new ones Ethereum token standards: ERC20R and ERC721R.
A token standard is an interface (or set of rules) that a smart contract must respect to be compatible with different decentralized applications.
The new token standards proposed are extensions of the existing ones ERC20 and ERC721 and will now include the ability to reverse malicious transactions.
“The biggest hacks we’ve seen are undeniably thefts with strong evidence,” so Wang. “If only there was a way to reverse these thefts under such circumstances.”
Decrypt has contacted Kaili Wang for comment.
How would reversible Ethereum tokens work?
Simply put, ERC20R and ERC721R combine a token contract and a governance contract.
according to suggestionthe governance smart contract is governed by a “decentralized judicial system” where a decentralized decision-making judges vote to freeze and reverse malicious transactions.
A victim whose funds were stolen or hacked, for example, can send a freeze request to the governance smart contract with appropriate evidence.
When the victim makes such a freeze request, he has to fund the legal process to reward the decentralized judges. Priority fees, which can be added to a case to speed up review time, can also be added by the victim, according to the proposal.
If the majority of decentralized judges vote in favor of the victim, the funds can be frozen and a trial initiated.
During the trial, both parties (the victim and the hacker) can submit their evidence to the decentralized judges, who in turn will vote on the outcome. Based on the final voting results, the funds are then either returned to the victim or the request is denied.
Although the idea could help reduce damage, many in the crypto space have criticized the researchers’ proposal.
Contrary to blockchain principles
The proposal has been widely criticized on Twitter by many in the industry, who argue that such tokens go against the fundamental principles of blockchain technology.
“This is a terrible idea that will not work and is against the whole point of cryptocurrency,” tweeted Kieran Daniels from the DeFi project Streams.
Argent, the popular mobile-first crypto wallet, too so that other mechanisms such as multi-signature wallets and social recovery can help fix this problem while remaining “truly permissionless”.
Besides clashing with crypto’s ethos, adding a reversibility feature to ERC20 token contracts can make it challenging to integrate with decentralized applications.
The “pressure” you mention is something that would work against you; no contracts would accept these tokens in the first place due to the complexity of handling chains of reversals,” so ZKLabs CEO Matthew Di Ferrante, CEO of ZkLabs.
Roman Semenov, the founder of sanctioned privacy product Tornado Cash, has also raised similar concerns about transaction reversibility and interoperability with decentralized applications.
Thus, while hacks have become common in the crypto industry, it may take some time for such incidents to truly be rectified. And if they ever are, it seems it may not be through a reversible Ethereum token.
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