Stanford experts Qinchen Wang, Kaili Wang, and Dan Boneh published a new proposal for two new Ethereum token standards (Reversible Ethereum), ERC20R and ERC721R, on September 9. The idea is for an “opt-in” token standard that would allow victims to report fraud to a governance contract, with algorithms assisting in detecting and freezing illegal earnings.
Stanford University recently completed a large study on protecting cryptocurrency assets from cyber-attacks. As a result, Stanford University devised a novel strategy to thwart cyber-attacks on digital assets and recover nearly $14 billion in funds stolen in 2021.
Reversible Ethereum transactions?! Even if it's voluntary, it could open up a Pandora's Box! pic.twitter.com/2ocmegihxy
— Coin Bureau (@coinbureau) September 26, 2022
Stanford University has proposed a novel method of freezing illegal gains from crypto assets. The reversible transactions of Ethereum will be useful in this approach.
A token standard is a set of rules or an interface. As a result, to work with various decentralized apps, the smart contract must adhere to a token standard. The newly proposed token standards, extensions of the existing ERC-20 and ERC-721 standards, would now allow for reversing harmful transactions.
The proposal would change the opt-in token standards for ERC-20 and ERC-721 tokens to ERC-20R and ERC-721R, respectively.
Kaili Wang, a Stanford Blockchain Researcher, tweeted on September 24 about the benefits of reversible Ethereum transactions, claiming that the approach could reduce the damage caused by thefts. The proposal’s primary goal, according to Wang, is not to change the distribution of ERC-20 tokens or to make Ethereum assets reversible. It is, however, to create an opt-in standard for the online recording of cyber-attack transactions.
Billions in crypto stolen. If we can't stop the thefts, can we reduce the harmful effects?
Over recent months, a couple other @Stanford researchers and I drew out and prototyped ERC-20R/721R to support reversible transactions on #Ethereum.
See post & :https://t.co/38Hs0F9goU
— kaili.eth (@kaili_jenner) September 24, 2022
According to the proposal, users may request that authorities freeze their crypto assets if they have been hacked and their assets have been stolen. According to the proposal, a “decentralized court system” governs Smart contract governance, in which a decentralized quorum of judges votes to freeze and reverse illegal transactions.
Based on the transaction’s facts, the decentralized courts can decide whether to seize the assets. The judges’ decision could be made in a day or two.
Does a ‘Reversible Ethereum’ Mean Crypto Risks Becoming More Like Fiat?
The Ethereum community is divided on whether the introduction of reversible transactions is a good thing. The irreversibility of transactions is a key characteristic of cryptocurrencies. Supporters of reversible transactions emphasize the increased security they provide. Opponents argue that Ethereum will begin to resemble the traditional financial (fiat) system by adopting this concept.
Reversible transactions, according to MonetSupply, “essentially break” the benefits of DeFi, such as quick settlement and features like atomic swaps. It implies that they will eliminate the disparity between cryptocurrencies and fiat currencies.
Criticism on Proposal
Many in the industry have taken to Twitter to voice their opposition to the proposal, arguing that such tokens violate the very tenets upon which blockchain technology was built. Kieran Daniels, a developer on the DeFi project Streams, tweeted, “This is a bad idea that won’t work and is against the entire point of cryptocurrencies.”
This is an incredibly bad idea that won’t work and against the entire point of cryptocurrency.
— kierandaniels.eth (@kieran_eth) September 24, 2022
While staying “truly permissionless,” Argent, a popular mobile-first crypto wallet, has stated that various techniques such as multi-signature wallets and social recovery can assist address this issue. Adding reversibility to ERC20 token contracts could make it difficult to connect with decentralized apps and is at odds with the concept of cryptocurrency.
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