The immutable nature of blockchain transactions is both a “blessing and a curse”, says Kaili Wang, a researcher from Stanford University.
Seeing as attacks, hacks and exploits have already cost the crypto industry roughly US$3 billion this year, Wang believes that making blockchain transactions partially reversible could work to significantly reduce the impact of nefarious actors on the industry.
In a Twitter thread, Wang outlines a “proposal” for a prototype Ethereum-based token, that would see on-chain transactions made temporarily rescindable.
“The major hacks we’ve seen are undeniably thefts with strong evidence. If there was a way to reverse those thefts under such circumstances, our ecosystem would be much safer”, wrote Wang.
How do these “reversible” transactions work?
Wang begins by claiming that the intention isn’t to make Ethereum transactions reversible. Instead, these tokens would introduce a “short time windows post-transaction for thefts to be contested and possibly restored”, with requests for a reversal being submitted to a “decentralised quorum” of judges.
The process begins with the victim, upon realising that funds have been stolen, placing a request to freeze the stolen funds. ‘Freeze’ in this sense means disallowing the funds to leave the wallet address they currently reside in.
Next, the judges decide whether or not to freeze the funds based on preliminary evidence, which Wang alleges is often quite clear cut in the case of major exploits. Following a successful freeze request, parties from both sides of the transaction — the victim and attacker — offer evidence for their case.
Following this, judges then vote on which evidence is most favourable and in cases where a hack or exploit has been determined, the funds are sent back to the victim and “justice is restored”.
While Wang clarified that the proposal was explicitly not aiming to describe “how reversible transactions ought to look like in final form” and was simply designed to “provoke discussion and even better solutions from the blockchain community,” a wave of outrage was sparked across Crypto Twitter.
Isn’t immutability the point of a blockchain?
The responses ranged from mildly polite inquiries into what utility reversible transactions could offer over traditional finance, all the way to one user’s blunt: “This is an incredibly bad idea that won’t work and against the entire point of cryptocurrency.”
Founder and CEO of crypto market-maker Wintermute, Evgeny Gaevoy made his thoughts clear, by drawing attention to the clear problem of making transactions even temporarily reversible, likening it to databases used by legacy banks.
Prominent Ethereum advocate and podcaster Anthony Sassano was equally sceptical, claiming that the concept of reversibility was essentially just a reiteration of the problems that emerge from traditional finance (TradFi).
After another Twitter user asked Sassano what harm the ERC-20R tokens could do as they were entirely “opt in”, to which he replied that user protections applied at the base layer are fundamentally antithetical to blockchain technology.
As always, memes came out in full force, with another Twitter user depicting the research team’s efforts as a defunct mug, claiming that reversible crypto transactions defeat the entire value proposition of a blockchain, which is literally irreversibility.