A team of researchers from Standford has presented a project to create reversible transactions on Ethereum (ETH). If this concept were to become a reality one day, it would give birth to a new family of tokens: the ERC-20R and ERC-721R.
The concept of reversible transactions on Ethereum (ETH)
Kaili Wang, a researcher at Stanford University, presented a white paper in which she and several of her colleagues describe a concept of reversible transactions.
The researcher explains that the idea for the project comes from the set of hacks, which the ecosystem has faced. She cites attacks such as the $320 million on the Wormhole bridge, or the various phishings of which some owners of Bored Apes, for example, have been victims.
It is true that in these cases, a “backspace” button would be useful. However, the idea may seem counter-intuitive, because the very essence of a blockchain is to be irreversible.
Of course, the goal is not to make the entire Ethereum blockchain reversible, that would not make sense. Instead, it would be through a new standard of tokens, which could be used for strategic cases: the ERC-20R and ERC-721R.
The concept would be that after an error in a transaction, or following a hack, we could make a claim to a decentralized court, in order to claim the return of assets.
The concept of the decentralized court
The ERC-20R and ERC-721R would be built by implementing various functions to enable challenges.
The victim actually calls a function called “requestfreeze(…)” which triggers the “trial”. First, the judges of the governance of the project to which these tokens belong vote on whether or not to freeze the assets, which will call the “freeze(…)” function. Then, after another vote, these same judges will decide whether to use the “reverse(…)” or “rejectReverse(…)” function to return the tokens to their original owner.
The white paper of this hypothetical category of tokens explains in detail how this algorithm works, nevertheless, several limitations can be observed.
For a non-fungible token (NFT), it is very easy to know on which address it is exactly, but what about fungible tokens? Let’s take the example with 10 stolen A tokens, which would be sent to another address already containing 10 other “clean” A tokens. Then the owner of this address sends them to two separate addresses in equal amounts.
In this example, it is not possible to know exactly where the stolen tokens are, yet the algorithm would target only one address.
While the reversible transactions presented by Kaili Wang are interesting, we note that in the case of a hack, one would have to react very quickly, as the “window of opportunity” would be very limited.
Such a technology could not be applied to the entire ecosystem, but if it were to emerge, certain decentralized autonomous organizations (DAOs) might find it interesting to adopt it for their governance tokens, for example.