Insights and analysisEditorial office

Popular cryptocurrencies have no “cancel button”. Meet the new reversible tokens!

Igor Grigorchenko

News editor

Sep 27, 2022 at 06:25

A group of Stanford researchers presented the concept of new standards for Ethereum tokens — ERC-20R and ERC-721R. They are intended to introduce the option of reversibility of the transaction in case of asset theft. Members of the crypto community met the idea without approval, but the group actively promotes the new type of tokens.

Reversible Transactions on Ethereum

Stanford University has developed and created prototype ERC-20R and ERC-721R tokens to support reversible Ethereum transactions, as blockchain researcher Kylie Wang reported in her blog (whitepaper, GitHub). These new standard tokens allow a short time (up to 3 days) after a transaction to dispute it and possibly get the funds back.

The brand new newsletter with insights, market analysis and daily opportunities.

Let’s grow together!

Under the proposed standard, if a user has funds stolen, they can submit a request to freeze those assets for the litigation process. A decentralized court would then approve or deny the request. Both sides of the transaction can provide the judges with evidence to make a fair decision.

In the case of NFT theft, the process will be more straightforward because the judges can block the account of whoever currently possesses the NFT. As for cryptocurrencies, an attacker’s ability to separate assets and run them through mixing services complicates the reversibility of transactions.

To prevent this, the researchers have developed an even more advanced algorithm that provides a “default freezing process to block stolen funds” for any transaction as a preventative measure. They note that this ensures enough funds are blocked to cover the stolen amount. As part of this concept, the researchers went even deeper than what standard banks offer today.

Alternative view

Discussing such innovations makes the community nervous, as it makes Ethereum an even less secure cryptosystem that regulators can directly manipulate.

Nevertheless, in our opinion, we should not reject this idea immediately unconditionally, as the huge number of scams and hacks in crypto has already become a problem that destroys reputation and prevents development. The history of Ethereum forks (with the formation of Ethereum Classic) is a perfect example of such unmanageable refunds after hacking The DAO.

What if we made this process more standardized and decentralized? The already existing institution of oracles allows for such an approach. Many people immediately imagine the government as an oracle, but if we use private distributed entities to do this?

The ideas of private courts are very important for further developing stateless network institutions within the DAO concept: insurance, derivatives (futures and options), credit with incomplete collateral, and many others. The possibilities of smart contract languages show once again that, over time, more and more functions and roles can be taken out from under the control of the state (or state-regulated centralized institutions) and transferred to network organizations.

Thus, if implemented correctly, the idea of reversible tokens will strengthen and empower cryptocurrencies. This does not mean that such implementations will not be really harmful and subordinate systems to the state in individual cases. What is important is that open technology will give a free market for smart contracts and oracles, allowing you to make your own choices.

All information provided on this website is for educational and informational purposes only. Please consult with our Disclaimer.

Home » Insights and analysis » Popular cryptocurrencies have no “cancel button”. Meet the new reversible tokens!

Your complaint has been sent to a moderator