According to Stanford researchers, Kaili Wang, Dan Boneh, and Quinchen Wang reversing Ethereum transactions may be a beneficial tool for blockchain technology. The reversibility of transactions allows theft within blockchain networks to be easily tacked and reversed. The inability to reverse blockchain transactions has been a double-edged sword for blockchain projects. Besides its numerous benefits, crypto theft with no possibility of reversals has been a major demerit.
Blockchain data is known to be immutable. The inability to change information on a blockchain has been at the core of its innovations are it’s viewed as a reliable source to obtain verifiable data. However, making Ethereum transactions reversible may be a good step toward curbing crypto theft.
Why Ethereum transaction reversal is important
According to the proposal, ERC-20R and ERC-721R imply reversible transactions on Ethereum Network for the conventional ERC-20 and ERC-721 tokens. The transactions are made partially reversible, making a somewhat hybrid Ethereum network. The transactions allow a specific small window for error checking, that allows contentions to be made after a transaction has occurred—for instance, a three-minute Window for the victim to request a freeze on the stolen tokens.
The freezing request was made to a governance contract. The victim is required to provide evidence of the malicious transaction and commit some tokens as a stake. The judges will then review the request and either accept it or reject it.
The judges are decentralized and policies are in place to ensure no bias. When a freeze request is accepted, the contested transaction is halted by executing the freeze function.
However, ERC-20R and ERC-721R pose different challenges. Since ERC-721R represents NFT transactions, which are non-fungible, allows easy tracing of addresses, and the freezing function can be easily executed. However, for ERC-20R transactions, the attacker can split the tokens into several addresses to avoid being traced. To avoid the perpetrators from maneuvering the freeze, the freeze is executed to the entire transaction and its calculations on-chain.
A freeze request can be contested as judges will require evidence from both sides in case of a dispute. The decentralized jury will then make the decision to either uphold the freeze or undo it. When the rejectReverse function is called, the assets are released and the initial transaction is upheld.
On the other hand, the reverse function is called when the victim wins the case and funds are returned to the victim, upon approval by the judges. The typical dispute resolution process takes about three days to complete.
Implementing Ethereum transaction reversal in exchanges
The new proposal for Ethereum transaction reversals appears to be a good option for the blockchain ecosystem. Several blockchains and cryptocurrency projects have lost funds through cyber attacks. Providing an ability for Ethereum token holders with another digital asset to contest malicious attacks and regain their funds is a huge step toward achieving blockchain efficiency.
Although the proposal appears to change the fundamental benefits of the Ethereum blockchain network, if the algorithm works smoothly to navigate the reversibility of ERC-20R tokens, it can be a revolutionary innovation within the Web 3 ecosystem that could save billions of dollars.