Stanford Launches Possible Solutions to Cryptocurrency Theft: ERC-20R and ERC-721R
Stanford has launched two Ethereum project solutions to counter theft and money laundering in the crypto space.
The Announcement
In a tweet, Kaili.eth, a member of Stanford, announced that the institution came up with the idea of reversible transactions in the blockchain network following the increased amount of cryptocurrency thefts happening in recent times.
Kaili.eth also posted a detailed explanation of how the team came up with the solution to mitigate theft early on and reverse the malicious transactions to the owners. The post indicated that the answer would also truck stolen funds before initiating the reverse transaction. This means that the owners of the addresses could potentially be found too.
The Stanford team comprised Dan Boneh, Qinchen Wang, and Kaili.eth. The team designed prototype tokens ERC-20R and ERC-721R to support the reverse of blockchain transactions. The team is also aware that having reversed transactions in the network would degrade blockchain trust in the users, as this is one of the attributes that has made the technology successful. The team, through the post, emphasized that the reversal transaction will only be initiated when the alleged victim provides enough evidence to prove the funds were stolen or transacted maliciously.
According to Stanford’s team, introducing reversible tokens will not replace ERC-20 tokens or make Ethereum transactions fully reversible. This will not be the case as the entire purpose of blockchain would be put at stake. The project will allow a short duration for thefts to be reported, investigated, and reversed. Stanford’s post explained:
“Now, you may be thinking: Reversible tokens? Doesn’t that just defeat the purpose of blockchain? Actually, no. It isn’t meant to replace ERC-20 tokens or make Ethereum reversible – it simply allows short time windows post-transaction for thefts to be contested and possibly restored.”
Transactions in the blockchain network involving the two prototype tokens (ERC-20R and ERC-721R) are only freezable for three days before the transaction is sealed and the funds become irreversible.
The Reversal Process
The reversal process will happen in five distinct stages. First, the alleged victim will request an asset freeze on the suspected stolen funds. Victims will request a governance contract attached with the evidence and some accompanying stake funds.
Once the complaint has been made, the governing judges may accept or decline the request depending on the nature of the transaction and the evidence submitted by the victim. The judges will decide to accept or reject an asset freeze through voting. This voting process should not last more than two days. The victim loses the stake if the evidence is presumed to be false. If the judges accept the request governance token will call ‘freeze’ on the ERC 20R and ERC-721R contracts.
The third stage is the execution stage. At this stage, the contract will track down the stolen funds and disallow the funds to be transacted.
The fourth stage will involve a trial where both parties present their cases to the jury for validation and ruling. The end of the fourth stage will initiate the fifth stage, which is the reversal stage. The governing contract will start a transaction that will redirect funds to the victim’s wallet address, and the perpetrator will be left to suffer the consequences.
